Olbermann, who was fired a week ago after about a year on the small progressive public affairs channel, said he was "enticed to leave" his old job at cable channel MSNBC and join Current with the promise of editorial control and professional support.
But Olbermann described Current TV founders Joel Hyatt and former U.S. Vice President Al Gore, and Current management as "no more than dilettantes portraying entertainment industry executives."
His lawsuit, filed in Los Angeles Superior Court, said he was owed between $50 million and $70 million in cash and equity compensation. Olbermann had taken an undisclosed equity stake in Current when he joined in 2011.
In a scathing attack on Current TV and its chief executive Hyatt, Olbermann said his prime time "Countdown" show was plagued with technical difficulties, including studio lights going off during broadcasts, frozen teleprompters and lost video feeds of guests during on-air interviews.
"Olbermann thought he had made a deal with a legitimate network and instead got an unprofessional cable-access show," the lawsuit said.
In the suit, Olbermann called Hyatt a "blackmailer" claiming the Current co-founder and CEO threatened to fire Olbermann's staff unless he agreed to ban his manager and agents from interactions with Current.
The lawsuit added that "Hyatt attempted to run the network as a personal hobbyhorse."
Current TV said last week it had dismissed Olbermann for breach of contract, claiming he tried to sabotage the network and had taken several unauthorized absences.
Olbermann replied in the lawsuit that the claims were "baseless and petty" and would all be disproven.
The outspoken liberal news anchor joined Current in February 2011 after abruptly quitting his top-rated program on MSNBC a month earlier for reasons that have never been clarified.
He was appointed chief news officer, took an equity stake in the channel launched in 2005 and became its biggest celebrity draw. But his nightly show attracted only an average 177,000 viewers - a fraction of the audience who watched him on MSNBC.
Olbermann claimed in Thursday's lawsuit that Current was at fault for failing to promote the show, especially online, refusing to invest and refusing to give him editorial control.
(Reporting By Jill Serjeant; editing by Bob Tourtellotte and Todd Eastham)