French prosecutors announced Saturday that they suspect Elon Musk deliberately fueled a controversy over sexualized deepfakes on X to artificially increase the company's value before a public offering. The inquiry targets the potential artificial boost to the firm's valuation ahead of a planned stock market listing in June 2026. Authorities confirmed the suspicion following initial reports by Le Monde newspaper regarding the use of Grok AI to generate non-consensual imagery without victim consent. The disclosure marks a significant escalation in the relationship between French justice officials and the American billionaire.
The Paris prosecutor's office stated that the controversy sparked by sexually explicit deepfakes generated by Grok may have been orchestrated for financial gain. This alleged maneuver aims to inflate the value of both X and its affiliated artificial intelligence entity, xAI, to benefit the merged structure. The investigation focuses on the planned merger between SpaceX and xAI, which could create a new entity for a public offering. Financial experts warn that such manipulation could violate securities laws if verified by investigators.
On Tuesday, French officials formally reached out to the US Department of Justice and the Securities and Exchange Commission to share their concerns regarding the alleged manipulation. This cross-border communication highlights the international scope of the regulatory scrutiny facing the tech giant and its leadership. X’s legal team in France did not immediately provide a comment regarding the specific formal allegations made by the court. The involvement of the SEC suggests that the matter may cross into securities fraud territory.
Elon Musk responded aggressively on the X platform, dismissing the French prosecutors as mentally retarded in a post written in French to his followers. This retort came after Agence France-Presse published coverage of the story, which Musk addressed directly on his social network earlier in the week. The exchange underscores the growing friction between Musk’s ventures and European regulatory bodies over content moderation issues. Musk has a history of clashing with regulators across multiple jurisdictions regarding platform governance.
French authorities are already investigating X over multiple allegations, including algorithmic interference in politics and the dissemination of Holocaust denials. These previous inquiries set a precedent for close monitoring of the platform’s content moderation practices and its impact on public discourse. The current probe adds to a growing list of legal challenges facing the company in Europe and beyond. These investigations occur as the European Union finalizes its Digital Services Act enforcement mechanisms.
Data from the Center for Countering Digital Hate indicates the AI chatbot generated an estimated three million sexualized images in just 11 days of operation. Most of these images depicted women, though the watchdog reported 23,000 images that appeared to show children in compromising situations. This volume of content generation occurred while users could tag the bot to request image editing and modification. The scale of the images generated represents a significant volume for an automated system within a short timeframe.
Le Monde identified several posts by Musk published at the height of the controversy, which prosecutors interpret as incitements to generate non-consensual images of others. The billionaire reportedly used numerous emojis to express delight regarding his AI engine’s undressing capabilities during the viral debate. He even shared an image where the chatbot depicted him wearing a bikini as part of the engagement. Prosecutors argue that such public comments could be construed as encouraging users to violate consent norms.
Market intelligence firm Sensor Tower reported that daily average app downloads for Grok worldwide soared by 72% from January 1 to January 19. This surge in interest followed the same period in December, according to data cited by The Washington Post regarding user engagement metrics. The increase suggests significant user engagement driven by the controversy surrounding the AI features at that time. The spike in engagement metrics correlates directly with the timing of the negative publicity cycle.
Both Britain and the European Union have opened investigations into the creation of the sexualized deepfakes following the initial reports from French media. French authorities summoned Musk to a voluntary interview last month while searching the local offices of his social media network in Paris. Musk characterized these actions as a political attack during the initial summons to the prosecutor's office. Musk previously stated that the platform would not compromise on free speech, yet these actions draw scrutiny.
Broader implications include potential regulatory hurdles for the planned June 2026 stock market listing of the merged entity involving SpaceX and xAI. Investors will likely monitor how these investigations affect the valuation of X and xAI in the coming months before any public declaration. The outcome of these inquiries could set a significant precedent for AI regulation in the global financial sector. Market analysts will pay close attention to any delays in the merger timeline as a result of these legal proceedings.
