OpenAI removes Sam Altman's ownership of its Startup Fund
reuters.com
reuters.com
A fund is not an incorporated entity, but rather a partnership of two persons. In a limited partnership, one of those persons is the general partner and does all the work and assumes the related liability, and the rest are "limited partners" who just commit capital.
Banks and tax authorities only open accounts for actually-formed partnerships, not hypothetical partnerships that might happen in the future. But, you need a bank account for the LP investors to send their money to.
So, in my experience it is super common to have a temporary Initial LP, which is usually a related person (one of the founders of the firm acting in their personal capacity, for example), to allow the Initial LP and the GP to form the fund and open the accounts. Then the Initial LP withdraws in the actual closing event where the investors sign onto the partnership agreement and commit their money.
I have never seen an "initial GP" though. I believe the explanation, but can't really figure out why one would be necessary. Maybe they wanted to incorporate a GP Co, but didn't get around to it?
Love to hear any theories why this might be useful..?
It could also be that the initial GP had individual contractual or ethical obligations that were counter to the best interest of other investors so could not continue acting in control of the investment vehicle, that'd be a reason to change
But no, no idea why you would plan to have an initial GP
The general partner is not an owner they are a manager. The general partner doesnt have to be a human either it can be another entity or multiple entities
all of this can be hotswapped
Even in a mini-master models or single US entity model, LPs are the owners, GP is just a managing member. “ownership” in the context of this article is ambiguous, but the SEC filings would add the clarity necessary for this discussion, probably “manager” or “controlling person”
otherwise, I don't know exactly. but I've personally been reading wiki pages on fund structures since I was 18 and not eligible for anything, just dissecting the quiet class systems I noticed. scouring SEC documents, and validating my assumptions with hedge fund lawyers and being an LP when I could afford it later
From there you can start to specialize in more specific structures by examining the filings of public companies or scouring the web to figure out how a particular fund you are interested in is structured.
To let you know, it is further complicated in US law by each state having different corporate rules. If you go with Delaware or New York it's probably your best bet for public, but closely held or private companies could be anywhere. As a starting place, most states adopt the Revised Uniform Partnership Act, or RUPA - that is available online through law.cornell.edu
In a vanilla fund, the GP is another partner and has "ownership" just like LPs do. Its just traditionally very insignificant.
The GP is simply a special partner as outlined in the LPA. They vote etc just like other LPs in major matters. They make minor decisions for the partnership. This is why usually that means the GP is the managing member.
Ive described the traditional VC fund.
No need to make it more complex with a master-feeder structure. Or a secondary, etc
I too am not an expert on corporate law, but very few governments make it legal to lie on these types of forms.
I'm inclined to go with this interpretation: https://news.ycombinator.com/item?id=39875809
But I will say that if it turns out that Sam's latest scheme for world domination has been foiled by him dogfooding his own product, then it's very very funny
I think the linked interpretation is very, very reasonable and it's a big reason why I tried to deemphasize all the "stuff" you've highlighted in my piece.
I think most of us would agree the person in question - if they're real - is exhibiting signs of a mental health crisis.
That said, I wouldn't have written the piece if I felt the aforementioned interpretation was the primary explanation to everything I'm seeing in the disclosures. I proactively tried as I went through the disclosures.
The issue I'm having is - regardless of what this person is able to concoct with ChatGPT or other methods - they shouldn't have been able to insert themselves and their Vespers "creation" into OpenAI Startup Fund I GP LLC's CA filings even if they wanted to.
One could argue they either needed to "hack" into the CA filing to insert themselves as Manager/CEO or someone at OpenAI allowed it happen (knowingly or unknowingly is tbd).
It also doesn't help OpenAI won't explain 1) how it happened, 2) why it took so long to catch it, and 3) why it wasn't reported to regulators once discovered:
"[OpenAI] declined to elaborate on how exactly fabricated documents came to be filed with the state of California."
I recognize this sounds a bit conspiratorial, but there are elements (I didn't cover) to this person's filings involving OAI that looks very thoughtful/intentional and are hard to dismiss as random/coincidental/hallucinated actions of someone that likely needs help.
And OAI's "response" didn't help address the actual issues I'm seeing.
(I'm not sure what the security processes for online filings are, but it wouldn't surprise me if someone sufficiently motivated and ambivalent about it being a felony could provide the necessary fake documentation, social engineering and/or brute force hacking to get their registered business given a notional role in someone else's unrelated business on a nonbinding document, at least until the other business noted and corrected the record. I know GPT "hallucinates" real names, but picking the existing aliases of the sort of person most likely to go down those rabbit holes seems quite the coincidence. And it'd have been odder if OpenAI's response was anything other than a generic spokesperson denial)
Regardless of how shady OpenAI's aims may have been, I genuinely think the root cause of this is that someone at OpenAI foolishly used ChatGPT to automate boring tax paperwork. ChatGPT decided "John Q Vesper" or whatever was a statistically plausible name for the CEO, and this dumb mistake wasn't caught by a human because nobody wants to read tax paperwork if they think a magical talking robot is capable of what seems like a routine task. I am assuming OpenAI didn't intend to tell a ridiculous and easily falsifiable lie in its tax filings (especially if that lie contradicted their public explanations about Altman's management of the fund!). OpenAI probably wanted the paperwork to say "Sam Altman."
FWIW the IRS is generally forgiving of good-faith tax errors, but I would suspect "we spent so long lying about our chatbot that we ourselves forgot that it's dumber than a pigeon and doesn't actually understand human language" doesn't count. Considering how many two-bit lawyers got in significant legal trouble for relying on ChatGPT hallucinations, it would be outrageous if OpenAI manages to get off scot-free here.
Anyway, my point was:
1. The disclosures point to "OpenAI Startup Fund I" being under the control of a fake company and CEO.
2. The fake company and CEO in question looks like the creation of an AI hallucination.
3. If a fake company and CEO were intentionally used by OpenAI, this isn't a minor infraction and there are highly consequential ramifications to consider given Altman's prior "ownership" of the fund, reported concerns it was being used to circumvent OpenAI Board oversight/governance, and participation in the fund was allegedly a means to invest in OpenAI.
Much of the piece is admittedly a helter-skelter collection of disclosures and explanations focused on supporting #1 and I don't really get into my rationale for #3.
Overall, it makes for bad long-form reading, but it did compel BI to do the needed journalistic follow-up work, made OAI acknowledge the filing was "illegitimate", and pushed the story forward.
We now know, according to OpenAI:
1. The company and CEO doesn't exist to their knowledge. 2. The document indicating this fake company and CEO controlled "Fund I" isn't legitimate and completely fabricated. 3. They're not willing to elaborate/explain how or why these "fabricated" entities got filed by them.
It's ugly spaghetti prose, but I'd say the write-up worked as intended.
Can someone explain how this could be true?
Or does it imply that he has no intention of profiting from the fund?
Is it a way to solidly say that Sam had no real say with authority so anything he and Elon agreed was not binding to the company and formally acknowledging that by this action?
give this man the shares he deserves, as well as any seed investors, stop all the petty drama and whatnot and let them be a company, it just makes sense. there was no way to know where the tech was going when they started