The legal battle between SpaceXAI and Ohio-based contractor Darana Hybrid has escalated dramatically.
According to The Daily Memphian, SpaceXAI filed a lawsuit Tuesday accusing Darana Hybrid and CEO Darryl Cuttell of fraud, breach of contract and overbilling tied to construction of the company’s Memphis- and Mississippi-area data centers. The lawsuit seeks more than $500 million in damages and punitive damages.
The lawsuit follows liens filed in Tennessee and Mississippi by Darana Hybrid claiming it is owed roughly $570 million for work performed on the projects. CompetitionPlus reported last week that Cuttell publicly alleged his company had stopped receiving payments after organizational changes following the merger of xAI and SpaceX.
According to The Daily Memphian’s review of the 40-page complaint, SpaceXAI alleges Darana overbilled the company by hundreds of millions of dollars, charged labor rates far above contractual limits and diverted company funds to projects unrelated to the data center construction.
The lawsuit also alleges Cuttell used proceeds from the contracts to support drag racing-related ventures, including work associated with Darana Motorsports Park in Millington and the International Hot Rod Association.
“Cuttell owns an international racing association, and he saw in the Memphis project a way to fund his racing ambitions at CTC’s expense,” the lawsuit states, according to The Daily Memphian.
The newspaper reported the lawsuit also alleges Darana billed SpaceXAI for unauthorized work associated with racing projects and improperly marked up subcontractor labor. According to the complaint, the contract limited labor markups to 10%, but SpaceXAI claims some invoices reflected markups reaching as much as 880%.
According to The Daily Memphian, the lawsuit alleges Darana refused a contractual audit request in May before SpaceXAI terminated the company for cause on June 23.
According to The Daily Memphian, the lawsuit alleges approximately $44.4 million that SpaceXAI intended to satisfy subcontractor obligations was not distributed as directed by Darana.
Cuttell denied the allegations in comments to The Daily Memphian.
“It’s all BS right now,” Cuttell told the newspaper. “I mean, it’s just smoke and mirrors.”
According to the report, Cuttell said labor rates had been agreed upon at the outset of the contract. He declined to answer additional questions regarding allegations involving Darana Motorsports Park.
The lawsuit adds another chapter to an increasingly contentious dispute between the two sides. Darana says it has not been paid for work performed on the projects, while SpaceXAI alleges the contractor overbilled the company and diverted funds. The claims and counterclaims have yet to be resolved in court.
