AI Hallucinated a Spy. A Real Company Paid For It: Palo Alto's Koi Security Sued for Branding a Startup a Chinese Spy Operation

Videoconferencing startup MeetingTV Inc. has sued Palo Alto Networks and its newly acquired unit Koi Security over a threat-research report that allegedly accused MeetingTV — falsely — of operating core infrastructure for a Chinese cyber-espionage group dubbed "DarkSpectre." According to the complaint, the accusation wasn't the product of forensic investigation. It came from Koi's proprietary AI platform, "Wings," which the suit says hallucinated the connection and generated "erroneous correlations" between MeetingTV's business and the alleged threat actor. MeetingTV alleges Koi "recklessly" published these "unverified AI-generated conclusions" with no meaningful human oversight or verification — despite the well-known fact that AI-assisted security tools are prone to exactly this kind of fabrication. The suit also raises pointed questions about whether the splashy report helped inflate the value of Koi's reported ~$400M acquisition by Palo Alto. Palo Alto confirmed it's aware of the lawsuit but declined to answer specific questions.