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Musk cites whistleblower as new reason to exit Twitter deal

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Tesla CEO Elon Musk and Twitter lobbed more accusations at each other on Tuesday over revelations by a Twitter whistleblower, who has taken r centrestage in Musk’s effort to back out of an agreement to buy the social media platform for $44 billion.

In a filing with the Securities and Exchange Commission, Musk said his legal team notified Twitter that information in a whistleblower complaint filed by Peiter Zatko, Twitter’s former head of security, provided additional reasons for ending the deal.

Twitter fired back, saying that Musk’s attempt to terminate the acquisition is “invalid and wrongful” and that it it was based solely on third-party statements that it claims are “riddled with inconsistencies and inaccuracies and lack important context.” Twitter has asked the Delaware Chancery Court to force Musk, a billionaire, to go through with the deal. A high-stakes trial is set to start on October 17 , although Musk is now also seeking to postpone it by a month.

Zatko, known by his hacker handle “Mudge,” served as Twitter’s head of security until he was fired early this year. He alleged in his complaint to US officials that the company misled regulators about its poor cybersecurity defenses and its negligence in attempting to root out fake accounts that spread misinformation.

Musk has spent months alleging that the company he agreed to acquire has undercounted its fake and spam accounts. The company’s alleged misstatements, he argues, mean that he shouldn’t have to go through with the deal.

Zatko received a subpoena Saturday from Musk’s team compelling him to testify in what Zatko’s lawyers emphasized would be an “involuntary” deposition ahead of the coming courtroom battle between Twitter and Musk.

“He did not make his whistleblower disclosures to the appropriate governmental bodies to benefit Musk or to harm Twitter, but rather to protect the American public and Twitter shareholders,” Zatko’s lawyers wrote in a prepared statement.

Musk seeks more time

Twitter is likely to amend its lawsuit to include Zatko’s allegations so the court can decide on both the bot and cybersecurity issues. That could delay the trial because Musk will say he needs more time to prepare, said Brian Quinn, a law professor at Boston College.

Musk lawyers are seeking permission from the court to push the trial start back to mid-to-late November.

The court will have to decide whether the bot or cybersecurity issues are a “material adverse effect” that will harm Twitter’s business for years — a difficult legal bar to clear, Quinn said.

The bot issue, which Twitter disclosed in filings with the SEC, seems to be an issue that Twitter would win on, Quinn said. Cybersecurity problems raised by Zatko may not be such an easy victory, he said.

“This is more grist for the mill,” Quinn said. “It’s not as obvious for the most part that this is a winner for Twitter. But once you start to analyze these closely, it’s still an uphill battle for Musk.”

Published on

August 31, 2022



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