AI data training startup Mercor, valued at $10 billion after a $350 million Series C funding round six months ago, is facing significant challenges following a data breach admitted on March 31. A hacker group claims to have exfiltrated 4TB of sensitive data, including candidate profiles, personally identifiable information, employer data, source code, and API keys, though Mercor has not confirmed the authenticity of this claim. The breach is attributed to a hack of the widely used open-source tool LiteLLM, which contained credential harvesting malware for 40 minutes. Consequently, Meta has indefinitely paused its contracts with Mercor, a critical partner for AI model training data. OpenAI is investigating its exposure but has not paused contracts, while other major model makers are reportedly re-evaluating their relationships. Additionally, five contractors have filed lawsuits against Mercor, with one also naming LiteLLM and its former security certifier, Delve, amid allegations of falsified certifications.