Did Hot Rodders try to rip off Musk and SpaceX?
Highlights:
- SpaceX companies and contractor war in court
- Space X accuses contractor of overcharging up to $800 million
- Contractor accused of using fraud to purchase IHRA and Memphis Motor Speedway
- Contractor tries to place over half a billion dollars in liens on data center projects
What began as a project creating a hi-tech land of milk and honey erupted into a bloody fight between SpaceX and its contractor in no less than three separate courtrooms. The court fight involves SpaceX's massive data center project in Memphis and Southaven with the contractor claiming the Elon Musk company owes nearly $600 million while SpaceX accuses the contractor of bilking it for nearly $800 million while using the money to fund the International Hot Rod Association and purchase of the defunct Memphis Motor Speedway.
CTC is building an AI training cluster in Memphis that is supported by the world's most powerful supercomputer. The company selected the old Electrolux factory in South Memphis for "Project Colossus." CTC is building a wastewater recycling facility in near the data centers and a power plant in Southaven at the site of the former Duke Energy plant.
The acronyms are about to start flying so read this paragraph word for ford. x.AI owns CTC. CTC manages the projects and in turn owns MZX Tech, LLC. MZX owns the properties. CTC hired Darana Hybrid as the general contractor for the project. IHRA President Darryll Cuttell of Ohio owns Darana. SpaceX assumed control of x.AI after the project began.
Durana and CTC executed a Master Services Agreement that became effective on April 15, 2024. The two parties later amended the contract to include Project Tulane, an additional data center of one million square feet on Tulane Road in Memphis. Durana operated as the project manager and was responsible for hiring and paying all subcontractors.
Darana Sues CTC
The partnership between the two companies blew up in May when CTC terminated the contract, claiming fraud. Darana won the race to the courthouse and sued CTC in Shelby County Chancery Court on August 3. The Darana complaint charged CTC with breach of contract and unjust enrichment while seeking the attachment of mechanics' and materialmen's lien against the defendant.
The complaint claims CTC "wrongfully terminated" Darana on June 23, 2026 and made its last payment on July 2. The plaintiff claims CTC owed $136,892,872 to Darana and its "many subcontractors". The contractor recorded a notice of mechanic's and materialmen's liens of $18,646,622 against the projects in Shelby County on July 30. Darana recorded a second notice of additional liens of $118,246,160 the next day.
Mr. Cuttrell told WMC he intended to file liens of $400 million against the Southaven property. The Darana owner said the relationship fractured in the spring when x.AI merged with SpaceX and new management took over the project. Article
Musk Companies: Not So Fast, My Friend
To quote the great Lee Corso, the Musk companies said not so fast, my friend, as x.AI, CTC, and MZX sued Darana Hybrid Inc., Cuttell Motorsports d/b/a as the International Hot Rod Association, and Darryl Cuttrell in U.S. District Court in Tennessee (Middle District) on August 4.
The complaint (it will be referred to as the CTC complaint) accused the defendants of bilking the company for $500-800 million in overcharges, diverting money to IHRA projects, and stiffing subcontractors and suppliers alike.
The contract limited Durana to marking up subcontractors by 10% while requiring CTC to pay invoices within 45 days of submission. The MSA stated CTC would pay $245/hour for Project Colossus and $200/hour for Project Tulane. An amendment to the agreement gave Mr. Cuttell $28.5 million in restricted stock options if three milestones were met.
CTC says it paid Darana $1.4 billion from April 2024 to July 2026.
Did Durana get greedy? The complaint claims Durana marked up its bills by up to 880%, resulting in overcharges of up to $800 million. Darana allegedly used subcontractors without required CTC approval. Darana instead charged a uniform rate for all labor, regardless of who performed it, thus increasing the rate paid to subcontractors by 200-800%. CTC argued Darana concealed the alleged fraud by failing to disclose it was using subcontractors, thus representing it was Darana that performed the actual work.
"There was barely a section of the MSA with which it managed to comply," argued the plaintiffs.
Although the contract gave CTC the right to audit Darana's project records, CTC accuses Darana of refusing to provide any records when CTC tried to audit the project. CTC claimed it went ahead and paid some subcontractors directly since the defendant "demonstrated it will simply pocket the funds, all so Cuttell can continue to enrich himself at the expense of everyone else involved in the project." Ouch.
CTC paid the "false invoices" until May including more than $900 million for labor alone that was allegedly inflated by fraudulent markups.
Curiously, the Musk company discovered the fraud by accident. When CTC applied to claim tax credits for the project, the company asked Darana to provide data. Darana unintentionally disclosed it paid some subcontractors between $21.60 and $112.50 per hour. and in turn charging CTC rates of $125 to $245 per hour, hence the alleged 880% markup.
The complaint continued with allegations of fraud. Darana billed CTC for some workers who logged more than 24 hours a day and more than 168 hours in a week (They should work at JPD.). CTC discovered double billing for the same labor, charges for work never performed, and excessive hours for workers' travel time to and from their homes.
CTC estimates Darana farmed out 75% of the work to subcontractors.
Mr. Cuttrell purchased the speedway in December 2025 and IHRA in December 2024, months after the checks started rolling in from CTC and x.AI. The speedway had been closed since 2022. The facility has a 1.8 mile drag-racing strip, three-quarter mile stock car racing track, dirt track, and a go-cart track. Mr. Cuttrell announced a $60 million upgrade for the defunct speedway at a January 7, 2026 press conference. WREG article and video.
The complaint accused Durana of committing more fraud by charging CTC $88,000 for safety equipment sent to IHRA's corporate headquarters in Ohio.while submitting over a dozen invoices for IHRA. Darana allegedly split up the invoices among the various projects in what was probably a bid to escape notice.
Remember the allegations of trademark infringement? Darana allegedly used x.AI trademarks in IHRA promotional materials. IHRA staff wore jackets bearing both the IHRA and x.AI logos at an industry event in December and at IHRA shows through March. The plaintiffs charge Mr. Cuttell is personally liable for use of the marks.
Termination
CTC terminated Darana's contract for cause on June 23. Seeking payback, the company claims the MSA authorizes it to withhold $500-800 million from what is owed Darana. However, Darana claimed on July 28 CTC owed it $137 million. CTC retorted it could not validate what was actually owed since Darana closed its books to the plaintiffs.
Darana's post-termination conduct allegedly threatens work on the project. Darana allegedly admitted it did not pay many of the suppliers and vendors After termination, Darana "fraudulently inducted" CTC to pay $45 million for specific suppliers. Darana threatened to get the suppliers and subcontractors to file mechanic's liens unless CTC made additional payments. CTC accused Darana of organizing the subcontractors to coordinate action against CTC for money Darana owes.
Although CTC transmitted $45 million to pay specific suppliers, Darana allegedly revealed on July 17 it diverted the funds for "other purposes" while claiming it was impossible to trace the funds. The complaint charges Darana with spending much of the money on 40 different hotels as well as equipment rentals and staffing agencies.
Darana, the complaint alleges, continued to not play nice. Darana sent a letter the day after termination that asked the Shelby County Construction Code Enforcement Action Office to immediately cancel all permits issued to Darana at the Memphis projects. Mr. Cuttell allegedly told the office not to transfer the permits to any other entity.
The contractors alleged bad faith forced CTC to spend another $8 million for expedited permits so work on the project would not be interrupted.
The complaint concludes with arguing Darryl Cuttell took his fight with the Musk companies to the media in violation of a confidentiality agreement.
The plaintiffs charge the defendants with breach of contract, breach of contract for out of scope work, Lanham Act violations (improper use of trademarks), breach of contract - failure to provide data, breach of contract - misappropriation of post-termination payments, conversion, unjust enrichment, fraud, and breach of contract - orderly wind down.
The complaint seeks compensatory damages of $500 million or more, mitigation costs, punitive damages, injunctive relief, interest, and attorney's fees. The plaintiffs requested the Court declare they are entitled to terminate the contract for causes, withhold payments to compensate for losses caused by breaches, and Darana is not entitled to further compensation.
The case is assigned to U.S. District Judge Brian Lea and Magistrate Judge Anne Christoff. A trio of Butler Snow attorneys at its Memphis branch represent the plaintiffs while no attorneys have yet entered an appearance for the defendants .
Hot Damn, Welcome to Mississippi
Darana opened a third front against the Musk companies by sueing MZX Tech, LLC, ET Olive Branch V, LLC, and Dev Property 2 MS, LLC in Desoto County Circuit Court on August 6.
Darana claimed it worked on several related projects in Southaven.* The company allegedly began providing construction services at the various sites in June 2025, January 2026, and April 2026. MZX sent it's last payment on July 2, 2026.
The plaintiff filed liens against the properties with the Desoto County Chancery Clerk on August 5, 2026.
The complaint seeks actual damages of $432,455,431 as well as interest and attorney's fees. The plaintiff charges the defendants with breach of contract and unjust enrichment while arguing the defendants violated Mississippi law by failing to pay invoices within 30 days.
Darana placed liens of $379,591,686 on the Stateline Road project, $50,016,402 on the Stanton Road project, $2.407,548 on the U.S. 51 project, and $439,794 on the Olive Branch project.
The case is assigned to Circuit Court Judge Wayne Hollowell. Attorneys Ross Webster and Samuel Rayburn of Memphis represent the plaintiff. No attorneys have entered an appearance for the defendants.
* Macroharder: 2400 Stateline Road, Macroharder: 2875 Stanton Road, Marcroharder: 3883 U.S. 51 (Duke power plant), Macroharder: 7700 Nail Road (Olive Branch)
Kingfish note: Some lawyers just got their vacations paid. The Shelby County lawsuit will probably be removed to federal court. It will not be a surprise if the defendants move the Desoto County lawsuit to federal court in the northern district of Mississippi and then consolidate all three lawsuits in federal court.
It will be interesting to see how this turns out. However, it doesn't look too good for Cuttell and crew if the Musk companies can back up their allegations. That is the nice thing about fraud cases: It is all in back and white. Either it happened or it didn't happen.
Perhaps Cuttrell should partner with J.D. Pass.
All three lawsuits are posted below.
5 comments:
A good tip is to never fight Elon Musk. Or rip him off.
My money is on Musk.
Grifter on grifter crime, nice.
Won't someone think of the billionaires.
In other news, Elon announced that he will put a giraffe on Pluto within 3 years and the international race war will begin before the end of this year because, well, it's 2026 and the world is unhappy. Or some other bullshit like most of what comes out of his mouth.
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