Co-Founder Files Lawsuit Against Stable Diffusion Startup Seeking Up to $300 Million

A former science lead at the company behind the AI image generator Stable Diffusion has sued the business for up to $300 million, according to court filings. Tayab Waseem, alleging to be a cofounder of Stability AI, claims that the company failed to honor its promise of a 10% stake in the London-based startup. Stability AI gained attention in 2022 with its Stable Diffusion program, which became popular for generating diverse images. The startup has raised $197 million so far, backed by investors such as Coatue, Lightspeed, and Intel.

A spokesperson for Stability AI described the lawsuit as “opportunistic and baseless,” stating that it had been filed and withdrawn previously. They mentioned that Waseem, a former medical student and intern, left before the company pivoted to generative AI, and emphasized that Stability AI would defend itself robustly in court.

Despite its previous success, Stability AI has encountered challenges, including a significant copyright lawsuit from Getty Images. CEO Emad Mostaque is also involved in another lawsuit with cofounder Cyrus Hodes over an alleged $100 million stake.

Waseem first filed a lawsuit against Stability AI in May but withdrew it the same day after the company proposed a resolution. He refiled the suit in the U.S District Court for the Eastern Court of Virginia, claiming an unfair allocation of company stock worth between $100 million and $300 million. The suit values Stability AI between $1 billion and $3 billion. Stability AI’s valuation was $1 billion in October 2022 but is suggested to have increased to $3 billion in recent filings.

Waseem joined Stability AI for a project called CAIAC, aimed at using AI against COVID-19. He became the chief scientific officer but claims he was not paid a formal salary, only promised equity. The lawsuit alleges that Waseem was instrumental in obtaining grants for the company and invested $11,000 of his own funds without receiving a salary.

The story, updated on January 17, 2024, includes a statement from Stability AI and invites contact from current or former employees.