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The shadow AI economy isn’t rebellion, it’s an $8.1 billion signal that CEOs aren’t measuring right

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Every Fortune 500 CEO investing in AI right now faces the same brutal math. They’re spending $590-$1,400 per employee annually on AI tools while 95% of their corporate AI initiatives fail to reach production.

Meanwhile, employees using personal AI tools succeed at a 40% rate.

The disconnect isn’t technological—it’s operational. Companies are struggling with a crisis in AI measurement.

Three questions I invite every leadership team to answer when they ask about ROI from AI pilots:

  1. How much are you spending on AI tools companywide? 
  2. What business problems are you solving with AI?
  3. Who gets fired if your AI strategy fails to deliver results?

That last question usually creates uncomfortable silence.

As the CEO of Lanai, an edge-based AI detection platform, I’ve deployed our AI Observability Agent across Fortune 500 companies for CISOs and CIOs who want to observe and understand what AI is doing at their companies.

What we’ve found is that many are surprised and unaware of everything from employee productivity to serious risks. At one major insurance company, for instance, the leadership team was confident they had “locked everything down” with an approved vendor list and security reviews. Instead, in just four days, we found 27 unauthorized AI tools running across their organization.

The more revealing discovery: One “unauthorized” tool was actually a Salesforce Einstein workflow. It was allowing the sales team to exceed its goals — but it also violated state insurance regulations. The team was creating lookalike models with customer ZIP codes, driving productivity and risk simultaneously. 

This is the paradox for companies seeking to tap AI’s full potential: You can’t measure what you can’t see. And you can’t guide a strategy (or operate without risk) when you don’t know what your employees are doing. 

‘Governance theater’

The way we’re measuring AI is holding companies back. 

Right now, most enterprises measure AI adoption the same way they do software deployment. They track licenses purchased, trainings completed, and applications accessed. 

That’s the wrong way to think about it. AI is workflow augmentation. The performance impact lives in interaction patterns between humans and AI, not solely on tool selection.

The way we currently do it can create systematic failure. Companies establish approved vendor lists that become obsolete before employees finish compliance training. Traditional network monitoring misses embedded AI in approved applications such as Microsoft Copilot, Adobe Firefly Slack AI and the aforementioned Salesforce Einstein. Security teams implement policies they cannot enforce, because 78% of enterprises use AI, while only 27% govern it.

This creates what I call the “governance theater” problem: AI initiatives that look successful on executive dashboards often deliver zero business value. Meanwhile, the AI usage that is driving real productivity gains remains completely invisible to leadership (and creates risk).

Shadow AI as systematic innovation

Risk doesn’t equal rebellion. Employees are trying to solve problems. 

Analyzing millions of AI interactions through our edge-based detection models proved what most operating leaders instinctively know, but cannot prove. What appears to be rule-breaking is often employees simply doing their work in ways that  that traditional measurement systems cannot detect.

Employees use unauthorized AI tools because they’re eager to succeed and  because sanctioned enterprise tools succeed in production only 5% of the time, while consumer tools like ChatGPT reach production 40% of the time. The “shadow” economy is more efficient than the official one. In some cases, employees may not even know they’re going rogue.

A technology company preparing for an IPO showed “ChatGPT – Approved” on security dashboards, but missed an analyst using personal ChatGPT Plus to analyze confidential revenue projections under deadline pressure. Our prompt-level visibility revealed SEC violation risks that network monitoring completely missed.

A healthcare system recognized doctors using Epic’s clinical decision support, but missed emergency physicians entering patient symptoms into embedded AI to accelerate diagnoses. While improving patient throughput, this violated HIPAA by using AI models not covered under business associate agreements.

The measurement transformation

Companies crossing the “GenAI divide” identified by MIT, whose Project Nanda identified the remarkable struggles with AI adoption, aren’t those with the biggest AI budgets; they’re those who can see, secure, and scale what actually works. Instead of asking, “Are employees following our AI policy?” they ask, “Which AI workflows drive results, and how do we make them compliant?”

Traditional metrics focus on deployment: tools purchased, users trained, policies created. Effective measurement focuses on workflow outcomes: Which interactions drive productivity? Which creates genuine risk? Which patterns should we standardize organization-wide?

The insurance company that discovered 27 unauthorized tools figured this out. 

Instead of shutting down ZIP code workflows driving sales performance, they built compliant data paths preserving productivity gains. Sales performance stayed high, regulatory risk disappeared, and they scaled the secured workflow companywide—turning compliance violation into competitive advantage worth millions.

The bottom line

Companies spending hundreds of millions on AI transformation while remaining blind to 89% of actual usage face compounding strategic disadvantages. They fund failed pilots while their best innovations happen invisibly, unmeasured and ungoverned.

Leading organizations now treat AI like the biggest workforce decision they’ll make. They require clear business cases, ROI projections, and success metrics for every AI investment. They establish named ownership where performance metrics include AI results tied to executive compensation.

The $8.1 billion enterprise AI market won’t deliver productivity gains through traditional software rollouts. It requires workflow-level visibility distinguishing innovation from violation.

Companies establishing workflow-based performance measurement will capture productivity gains their employees already generate. Those sticking with application-based metrics will continue funding failed pilots while competitors exploit their blind spots.

The question isn’t whether to measure shadow AI—it’s whether measurement systems are sophisticated enough to turn invisible workforce productivity into sustainable competitive advantage. For most enterprises, the answer reveals an urgent strategic gap.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

Fortune Global Forum returns Oct. 26–27, 2025 in Riyadh. CEOs and global leaders will gather for a dynamic, invitation-only event shaping the future of business. Apply for an invitation.



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Epstein grand jury documents from Florida can be released by DOJ, judge rules

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A federal judge on Friday gave the Justice Department permission to release transcripts of a grand jury investigation into Jeffrey Epstein’s abuse of underage girls in Florida — a case that ultimately ended without any federal charges being filed against the millionaire sex offender.

U.S. District Judge Rodney Smith said a recently passed federal law ordering the release of records related to Epstein overrode the usual rules about grand jury secrecy.

The law signed in November by President Donald Trump compels the Justice Department, FBI and federal prosecutors to release later this month the vast troves of material they have amassed during investigations into Epstein that date back at least two decades.

Friday’s court ruling dealt with the earliest known federal inquiry.

In 2005, police in Palm Beach, Florida, where Epstein had a mansion, began interviewing teenage girls who told of being hired to give the financier sexualized massages. The FBI later joined the investigation.

Federal prosecutors in Florida prepared an indictment in 2007, but Epstein’s lawyers attacked the credibility of his accusers publicly while secretly negotiating a plea bargain that would let him avoid serious jail time.

In 2008, Epstein pleaded guilty to relatively minor state charges of soliciting prostitution from someone under age 18. He served most of his 18-month sentence in a work release program that let him spend his days in his office.

The U.S. attorney in Miami at the time, Alex Acosta, agreed not to prosecute Epstein on federal charges — a decision that outraged Epstein’s accusers. After the Miami Herald reexamined the unusual plea bargain in a series of stories in 2018, public outrage over Epstein’s light sentence led to Acosta’s resignation as Trump’s labor secretary.

A Justice Department report in 2020 found that Acosta exercised “poor judgment” in handling the investigation, but it also said he did not engage in professional misconduct.

A different federal prosecutor, in New York, brought a sex trafficking indictment against Epstein in 2019, mirroring some of the same allegations involving underage girls that had been the subject of the aborted investigation. Epstein killed himself while awaiting trial. His longtime confidant and ex-girlfriend, Ghislaine Maxwell, was then tried on similar charges, convicted and sentenced in 2022 to 20 years in prison.

Transcripts of the grand jury proceedings from the aborted federal case in Florida could shed more light on federal prosecutors’ decision not to go forward with it. Records related to state grand jury proceedings have already been made public.

When the documents will be released is unknown. The Justice Department asked the court to unseal them so they could be released with other records required to be disclosed under the Epstein Files Transparency Act. The Justice Department hasn’t set a timetable for when it plans to start releasing information, but the law set a deadline of Dec. 19.

The law also allows the Justice Department to withhold files that it says could jeopardize an active federal investigation. Files can also be withheld if they’re found to be classified or if they pertain to national defense or foreign policy.

One of the federal prosecutors on the Florida case did not answer a phone call Friday and the other declined to answer questions.

A judge had previously declined to release the grand jury records, citing the usual rules about grand jury secrecy, but Smith said the new federal law allowed public disclosure.

The Justice Department has separate requests pending for the release of grand jury records related to the sex trafficking cases against Epstein and Maxwell in New York. The judges in those matters have said they plan to rule expeditiously.

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Sisak reported from New York.



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Miss Universe co-owner gets bank accounts frozen as part of probe into drugs, fuel and arms trafficking

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Mexico’s anti-money laundering office has frozen the bank accounts of the Mexican co-owner of Miss Universe as part of an investigation into drugs, fuel and arms trafficking, an official said Friday.

The country’s Financial Intelligence Unit, which oversees the fight against money laundering, froze Mexican businessman Raúl Rocha Cantú’s bank accounts in Mexico, a federal official told The Associated Press on condition of anonymity because he was not authorized to comment on the investigation.

The action against Rocha Cantú adds to mounting controversies for the Miss Universe organization. Last week, a court in Thailand issued an arrest warrant for the Thai co-owner of the Miss Universe Organization in connection with a fraud case and this year’s competition — won by Miss Mexico Fatima Bosch — faced allegations of rigging.

The Miss Universe organization did not immediately respond to an email from The Associated Press seeking comment about the allegations against Rocha Cantú.

Mexico’s federal prosecutors said last week that Rocha Cantú has been under investigation since November 2024 for alleged organized crime activity, including drug and arms trafficking, as well as fuel theft. Last month, a federal judge issued 13 arrest warrants for some of those involved in the case, including the Mexican businessman, whose company Legacy Holding Group USA owns 50% of the Miss Universe shares.

The organization’s other 50% belongs to JKN Global Group Public Co. Ltd., a company owned by Jakkaphong “Anne” Jakrajutatip.

A Thai court last week issued an arrest warrant for Jakrajutatip who was released on bail in 2023 on the fraud case. She failed to appear as required in a Bangkok court on Nov. 25. Since she did not notify the court about her absence, she was deemed to be a flight risk, according to a statement from the Bangkok South District Court.

The court rescheduled her hearing for Dec. 26.

Rocha Cantú was also a part owner of the Casino Royale in the northern Mexican city of Monterrey, when it was attacked in 2011 by a group of gunmen who entered it, doused gasoline and set it on fire, killing 52 people.

Baltazar Saucedo Estrada, who was charged with planning the attack, was sentenced in July to 135 years in prison.



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Elon Musk’s X fined $140 million by EU for breaching digital regulations

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European Union regulators on Friday fined X, Elon Musk’s social media platform, 120 million euros ($140 million) for breaches of the bloc’s digital regulations, in a move that risks rekindling tensions with Washington over free speech.

The European Commission issued its decision following an investigation it opened two years ago into X under the 27-nation bloc’s Digital Services Act, also known as the DSA.

It’s the first time that the EU has issued a so-called non-compliance decision since rolling out the DSA. The sweeping rulebook requires platforms to take more responsibility for protecting European users and cleaning up harmful or illegal content and products on their sites, under threat of hefty fines.

The Commission, the bloc’s executive arm, said it was punishing X because of three different breaches of the DSA’s transparency requirements. The decision could rile President Donald Trump, whose administration has lashed out at digital regulations, complained that Brussels was targeting U.S. tech companies and vowed to retaliate.

U.S. Secretary of State Marco Rubio posted on his X account that the Commission’s fine was akin to an attack on the American people. Musk later agreed with Rubio’s sentiment.

“The European Commission’s $140 million fine isn’t just an attack on @X, it’s an attack on all American tech platforms and the American people by foreign governments,” Rubio wrote. “The days of censoring Americans online are over.”

Vice President JD Vance, posting on X ahead of the decision, accused the Commission of seeking to fine X “for not engaging in censorship.”

“The EU should be supporting free speech not attacking American companies over garbage,” he wrote.

Officials denied the rules were intended to muzzle Big Tech companies. The Commission is “not targeting anyone, not targeting any company, not targeting any jurisdictions based on their color or their country of origin,” spokesman Thomas Regnier told a regular briefing in Brussels. “Absolutely not. This is based on a process, democratic process.”

X did not respond immediately to an email request for comment.

EU regulators had already outlined their accusations in mid-2024 when they released preliminary findings of their investigation into X.

Regulators said X’s blue checkmarks broke the rules because on “deceptive design practices” and could expose users to scams and manipulation.

Before Musk acquired X, when it was previously known as Twitter, the checkmarks mirrored verification badges common on social media and were largely reserved for celebrities, politicians and other influential accounts, such as Beyonce, Pope Francis, writer Neil Gaiman and rapper Lil Nas X.

After he bought it in 2022, the site started issuing the badges to anyone who wanted to pay $8 per month.

That means X does not meaningfully verify who’s behind the account, “making it difficult for users to judge the authenticity of accounts and content they engage with,” the Commission said in its announcement.

X also fell short of the transparency requirements for its ad database, regulators said.

Platforms in the EU are required to provide a database of all the digital advertisements they have carried, with details such as who paid for them and the intended audience, to help researches detect scams, fake ads and coordinated influence campaigns. But X’s database, the Commission said, is undermined by design features and access barriers such as “excessive delays in processing.”

Regulators also said X also puts up “unnecessary barriers” for researchers trying to access public data, which stymies research into systemic risks that European users face.

“Deceiving users with blue checkmarks, obscuring information on ads and shutting out researchers have no place online in the EU. The DSA protects users,” Henna Virkkunen, the EU’s executive vice-president for tech sovereignty, security and democracy, said in a prepared statement.

The Commission also wrapped up a separate DSA case Friday involving TikTok’s ad database after the video-sharing platform promised to make changes to ensure full transparency.

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AP Writer Lorne Cook in Brussels contributed to this report.



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