A lawsuit filed by a former executive is casting a shadow over SandboxAQ, an AI and quantum computing startup, with allegations of financial misconduct and inappropriate behavior leveled against its CEO, Jack Hidary. The former Chief of Staff, Robert Bender, alleges wrongful termination after raising concerns about the company’s practices. SandboxAQ has vehemently denied the claims, labeling them a “complete fabrication” and an attempt at extortion.
The dispute, which unfolded in court filings last month and Friday, offers a rare glimpse into the internal workings of a high-profile Silicon Valley company backed by billionaires like Eric Schmidt and Marc Benioff. The case highlights the challenges of transparency even within privately held firms, and the potential for explosive revelations when employee disputes become public.
Allegations of Misconduct at SandboxAQ
Robert Bender’s complaint, filed in mid-December, details accusations spanning financial irregularities and personal conduct. He claims he was terminated after questioning the use of company resources, including investor funds, to facilitate personal relationships. Specifically, the suit alleges Hidary used company assets to “solicit, transport, and entertain female companions,” with a text message included as an exhibit referencing prostitutes.
However, Bender himself redacted portions of the lawsuit concerning “sexual encounters” and the physical condition of individuals he observed during business travel, a highly unusual move. Legal experts suggest this could be to protect third parties or, alternatively, to signal the existence of even more damaging information.
Financial Concerns Raised
Beyond the allegations of personal misconduct, Bender’s lawsuit claims that SandboxAQ misled investors regarding its financial performance. He asserts that revenue figures presented to the board of directors were significantly lower – by as much as 50% – than those showcased to potential investors during fundraising efforts. This discrepancy, according to Bender, formed the basis for a premium stock sale by Hidary.
SandboxAQ’s legal team, led by Orin Snyder of Gibson Dunn, strongly refutes these claims. They maintain that the company made no fraudulent disclosures and that Hidary did not misuse corporate assets. The company’s response accuses Bender of inventing the allegations to deflect from his own potential wrongdoing.
SandboxAQ’s Rise and Notable Investors
SandboxAQ originated as a “moonshot” project within Alphabet, Google’s parent company, under the leadership of Jack Hidary. In March 2022, it was spun out as an independent entity, quickly attracting substantial investment from prominent figures in the tech and finance worlds.
The company’s investor roster includes Eric Schmidt, former CEO of Google and now SandboxAQ’s chairman; Salesforce CEO Marc Benioff; venture capitalist Jim Breyer; and Ray Dalio, founder of Bridgewater Associates. This backing fueled rapid growth, with SandboxAQ raising over $450 million in a Series E funding round in April, alongside a $90 million secondary sale.
According to PitchBook estimates, SandboxAQ has raised a total of $1 billion and is currently valued at $5.75 billion. The company focuses on developing AI-powered solutions for complex problems, leveraging quantum computing technologies. This ambitious undertaking has drawn significant attention and capital, despite the recent controversy.
Echoes of Previous Reporting
The allegations in Bender’s lawsuit align with a prior investigative report published by The Information in July. That report detailed similar claims regarding Hidary’s use of company resources for personal travel with romantic partners and questioned the accuracy of the company’s revenue projections.
Bender denies being a source for The Information’s story, while SandboxAQ claims he was and is now being dishonest about his involvement. This dispute over the source of the initial reporting adds another layer of complexity to the case. The broader issue of quantum computing investment and oversight is also being brought into sharper focus.
The lawsuit also touches on the growing trend of venture capital funding in the AI space, and the potential for conflicts of interest within rapidly scaling startups. The involvement of so many high-profile investors adds pressure to resolve the situation swiftly and transparently.
The case is expected to proceed through discovery, with potential depositions and document requests. A court date has not yet been set. The outcome will likely depend on the evidence presented and the credibility of the witnesses, including both Bender and Hidary. Observers will be watching closely to see if the redacted portions of the lawsuit are ultimately revealed and how they might impact the proceedings, as well as the future of SandboxAQ.
