Twitter Receives Another Blow from Musk Amid Falling Shares and Whistleblower Revelations
Elon Musk launched a devastating attack on Twitter Tuesday, saying whistleblower complaints against the company are more than enough evidence that he was deceived when he offered to buy the social media giant for $44 billion.
In July, Musk said he wanted out of the deal, claiming that Twitter did not provide him with enough information so that he could judge for himself the extent of its fake accounts, which Twitter has said number about 5 percent and Musk has estimated could be at 20 percent.
Twitter responded by countersuing, with the legal wrangle set for court in October.
On Tuesday, Musk pummeled the company with a filing based on comments from Peiter Zatko, a former Twitter executive who in July filed a complaint with the Securities and Exchange Commission that accused Twitter of “extreme, egregious deficiencies” in privacy, security and content moderation, according to CNBC.
By the end of the day, Twitter’s shares were down 1.8 percent.
Musk’s SEC filing said that because Twitter was aware of Zatko’s allegations, he should be able to terminate the deal.
“Allegations regarding certain facts, known to Twitter prior to and as of July 8, 2022, but undisclosed to the Musk Parties prior to and at that time, have since come to light that provide additional and distinct bases to terminate the Merger Agreement,” the filing said.
The new filing said Zatko’s complaint “alleges far-reaching misconduct at Twitter — all of which was disclosed to Twitter’s directors and senior executives, including Parag Agrawal — that is likely to have severe consequences for Twitter’s business.”
The complaint hones in on the impact of Zatko’s claims on a 2011 consent decree with the Federal Trade Commission that “required Twitter to establish and maintain ‘a comprehensive information security plan’ to ensure that its users’ personal data was sufficiently protected from disclosure.”
“Mr. Zatko’s statements purport to reveal that Twitter has not been, and perhaps never will be, in compliance with that decree,” Musk’s filing said.
The new SEC filing then attacks Twitter’s overall compliance.
“In addition, the Zatko Complaint alleges that Twitter has repeatedly violated the 2011 FTC consent decree (by going well beyond the violations settled in Twitter’s recent $150 million settlement), in addition to breaching a slew of other data privacy, unfair trade practice, cybersecurity and consumer protection laws and regulations that Twitter must comply with, including but not limited to Twitter granting agents of the Indian government access to confidential user data,” Musk’s new filing said.
“These violations would have material, if not existential, consequences to Twitter’s business, constituting a Company Material Adverse Effect as defined in the Merger Agreement,” it continued.
The filing implied that Twitter is a cybersecurity accident waiting to happen by saying it is “uniquely vulnerable to systemic disruption resulting from data center failures or malicious actors,” something senior management knew about but “ignored and sought to obfuscate.”
If Musk backs out, will the SEC really investigate Twitter? https://t.co/QYV6HBMFq6
— Joe (@joevaldman) August 30, 2022
Twitter responded by saying Musk’s filing “is based solely on statements made by a third party that, as Twitter has previously stated, are riddled with inconsistencies and inaccuracies and lack important context,” according to CNBC.
“Contrary to the assertions in your letter, Twitter has breached none of its representations or obligations under the Agreement, and Twitter has not suffered and is not likely to suffer a Company Material Adverse Effect.”
In a complaint, Zatko said he “witnessed senior executive engaging in deceitful and/or misleading communications affecting Board members, users and shareholders” on several occasions in 2021, according to CNBC.
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