Elon Musk Decries Twitter Deal Over Whistle-Blower as Feud Escalates

The potential impact of a whistleblower’s allegations on Elon Musk’s proposed $44 billion acquisition of the social media platform is the subject of a legal dispute between Twitter Inc. and Musk’s legal team.

The claims made by Peiter Zatko, Twitter’s former head of security, including claims of “egregious deficiencies” in the platform’s defenses against hackers and privacy issues, were made in a securities filing on Tuesday by lawyers for Musk, who claimed that Twitter had violated the terms of the merger agreement.

Shortly after, Twitter’s legal team responded with a separate filing, claiming that Musk’s request to terminate the agreement is “invalid and wrongful.”

Since months, Musk has been making an effort to free himself from the control of Twitter. At first, he claimed that millions of robot accounts were inflating Twitter’s user numbers. However, Zatko’s allegations, which surfaced last week, have given Musk’s camp fresh fodder. When Twitter fired Zatko earlier this year, he brought up serious issues with the way the social media company handled users’ personal data, including using outdated software. He added that executives had concealed information about security holes and a lack of user data protections.

On Tuesday, Twitter reaffirmed that Zatko’s complaint is “riddled with inconsistencies and inaccuracies and lacks important context.” Twitter claims it hasn’t broken any of its commitments and that it will go through with the transaction “on the price and terms agreed upon” and enforce the agreement.

Tuesday morning in New York, Twitter shares were down less than 1% at $39.72, much lower than Musk’s offer price of $54.20.

Peiter Zatko | Source Image: Instagram

Zatko, who claimed that Twitter officials didn’t know or care to find out how many accounts were spam or robot accounts, has been subpoenaed by attorneys for both Musk and Twitter.

Twitter, which has insisted that less than 5% of accounts are spam or bots, sued Musk in July to compel him to complete the acquisition he had in mind. Since then, more than 100 people, banks, funds, and other businesses have been served subpoenas in the lawsuit. A trial is set to start in Delaware on October 17th.

According to the letter from Musk’s attorneys released on Tuesday, the new information supports his claims and demonstrates that Twitter is in “material noncompliance” with its obligations under consumer protection and data privacy laws, making it more susceptible to malicious actors and data center failures.

A request to a chancery judge to permit court filings to be amended frequently comes before a letter like the one that was sent on Tuesday. If Musk can add Zatko’s allegations as grounds for rejecting the deal in his counterclaims in the Twitter case, Judge Kathaleen St. J. McCormick still has to rule on that.

According to a 2020 chancery decision in the case of Posco Energy Ltd. v. FuelCell Energy Inc., under Delaware law, a judge’s authority to grant such amendments is “liberally granted, unless, in a narrowly construed exception, there is inexcusable delay and prejudice to the defendant.”

According to Zatko’s attorneys, he made his whistle-blower disclosures “more to protect the American public and Twitter shareholders” than to help Musk or hurt Twitter.

SOURCE: Bloomberg