Elon Musk cites Twitter whistleblower as new reason to cancel $44 billion deal

Elon Musk has seized on a whistleblower report from Twitter’s former security chief to bolster his legal fight to end his $44 billion deal to buy the social media company.

Musk’s legal team wrote to Twitter executives on Monday, according to a Tuesday filing, saying that if true, Peiter Zatko’s allegations violate several aspects of the merger agreement reached in April but which the billionaire has been trying to abandon since July.

Later Tuesday, the Tesla chief also requested a postponement of the trial, which is scheduled for October in the Delaware Court of Chancery.

Zatko, known in cybersecurity circles as “Mudge,” also received a subpoena from Musk’s team over the weekend to testify in the case.

So far, Musk’s legal efforts to extricate himself from the deal have focused on the extent of the The problem of fake Twitter users. Monday’s letter lays out a much broader argument, suggesting that if Zatko’s claims are true, they give the billionaire the right to terminate the merger deal on several counts.

Twitter’s attorneys responded on Tuesday, saying the termination notice was “invalid and abusive under the agreement.” They said the advice was based solely on statements made by a third party which “are riddled with inconsistencies and inaccuracies”.

Zatko, who was fired by Twitter earlier this year and is now represented by Whistleblower Aid, filed a lawsuit with US authorities alleging the social media company misled users and regulators about its cybersecurity defenses.

Zatko alleged that Twitter violated its obligations under a 2011 agreement with the Federal Trade Commission to protect user data and failed to disclose material information about security vulnerabilities to investors and its advisory board. ‘administration. As a result, Musk’s legal team says the platform could face a hefty fine, with “material, even existential, consequences to Twitter’s business.”

The social media site said in response that it had “not breached any of its representations or obligations under the Agreement, and Twitter has not suffered and is not likely to suffer a Material Adverse Effect for the company”. He has consistently defended his fake user disclosures against Musk’s arguments that he underreported the number of spam and fraudulent accounts.

Zatko’s complaint was filed with the U.S. Securities and Exchange Commission, Department of Justice and FTC as well as members of Congress on July 6, two days before Musk announced that it wanted to give up its agreement with Twitter.

Musk’s attorneys wrote, “The facts supporting these breaches, which were withheld from Musk’s parties but known to Twitter as of the date of the merger agreement and the time of the notice of termination of July 8, provided additional grounds for terminating the merger agreement. ”

Ann Lipton, a business law professor at Tulane University in New Orleans, said Musk would have to show that the problems alleged by the former security chief “would have a significant long-term effect on Twitter’s finances. “.

“He relies heavily on Zatko’s complaint, but Zatko actually agrees with Twitter that the [audience] the measurement is reported accurately. Since [user numbers are] almost everything that has been argued so far puts Musk in an awkward position.

Twitter has long come under scrutiny over its cybersecurity controls, including after hackers peddled a crypto scam took over the official accounts from hundreds of public and corporate figures in July 2020. Zatko was brought in by former chief executive Jack Dorsey following the hack.

Musk’s legal team last week issued a subpoena to Dorsey, who resigned as Twitter chief in November, seeking any communication between him and executives regarding the handling of fake accounts.

Dorsey is just one of dozens of Silicon Valley executives who could be embroiled in the spiraling legal battle as the billionaire and the platform search for evidence to back up their cases.

Additional reporting by Hannah Murphy

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