Investors consider legal action against OpenAI after abrupt removal of Sam Altman

Following the board's removal of CEO Sam Altman and possible mass staff departure, some investors in OpenAI, the firm behind ChatGPT, are considering taking legal action against the board, according to people with knowledge of the situation.

Investors are studying their alternatives with the help of legal advisors, Reuters reported on Monday citing unnamed sources with knowledge of the matter. 

However, it is still unclear whether or not these investors will sue OpenAI. 

Investors, who believe the AI firm is a crown jewel in some of their portfolios, have sounded alarms over the hundreds of millions invested in OpenAI.

They have raised concerns saying that what appears to be a potential collapse of the hottest AI startup in the rapidly growing generative AI sector, could result in catastrophic losses.

By Monday, over 700 OpenAI employees threatened to resign unless the company replaced the board. OpenAI's board fired Altman on Friday after a "breakdown of communications," according to an internal memo.

What made the case unusual for VC investors, who usually hold board seats or voting power in their portfolios, is that OpenAI is controlled by its non-profit parent company OpenAI Nonprofit, which was created to benefit "humanity, not OpenAI investors."

As a result, employees have more leverage than the venture capitalists who helped pay their salaries, said Minor Myers, a law professor at the University of Connecticut.

Microsoft owns 49% of the company, while other investors and employees control 49%, with 2% owned by OpenAI's nonprofit parent.