Elon Musk has added Peiter “Mudge” Zatko’s concerns about Twitter security to his list of justifications for abandoning his $44 billion plan to acquire Twitter.
Since April, Musk’s complicated takeover proposal has gone through several phases. In the end, the CEO of Tesla and SpaceX decided he didn’t want to purchase Twitter, after all, citing uncertainty regarding Twitter’s bot data.
Twitter, however, has rejected Musk’s offer to resign, and the company is now taking legal action to compel Musk to accept his initial offer. Meanwhile, a trial is now set for October 17.
Musk’s legal team added a notice of termination of the agreement in a new filing with the Securities and Exchange Commission (SEC), citing allegations made by Twitter’s former head of security last week. The social network misled everyone about the strength of its security protocols, according to Zatko, who was fired by Twitter in January after serving in the position for a little over a year.
He noted that he saw “egregious deficiencies, negligence, wilful ignorance, and threats to national security and democracy” at Twitter. Zatko also said that Twitter made an effort to hide its flaws from investors and regulators.
Musk Gets More Leverage
While it’s unclear how much Musk’s attempts to withdraw his takeover bid may benefit from Zatko’s whistleblowing activities, they undoubtedly give him more leverage. Yesterday, it was revealed that his legal team had served a subpoena on Zatko, asking for whatever information that could support Musk’s claim, including proof of spam, security flaw’s, suspected foreign spies working for Twitter, and evidence relating to spam.
Musk’s legal team is attempting to strengthen their position if their previously submitted termination notice “is ruled invalid for whatever reason,” as the SEC filing demonstrates. Basically, his team wants more reasons to rely on if Musk’s original claims of undercounted bot data are unsuccessful.
“The Zatko Complaint alleges far-reaching misconduct at Twitter — all of which was disclosed to Twitter’s directors and senior executives, including Parag Agrawal (Twitter’s CEO) — that is likely to have severe consequences for Twitter’s business,” Musk’s legal representative Mike Ringler wrote. “For example, Mr. Zatko alleges that Twitter is in material noncompliance with both its obligations under a 2011 FTC consent decree and its general obligations under data privacy, unfair trade practice, and consumer protection laws and regulations.”
Ringler cited additional claims made by Zatko, such as the notion that Twitter’s leadership team has allegedly tried to cover up claims that the social media platform is “uniquely vulnerable to systemic disruption” brought on by data center failures or malevolent actors. He further emphasized Zatko’s claim that Twitter acceded to the Indian government’s demands to hire its agents and get access to user information.
In other words, Musk and his legal team are currently investigating more possible violations of the merger agreement by Twitter, and they need Zatko’s assistance.
Separately, Twitter responded to Musk’s most recent SEC filing and, quite unexpectedly, disputed his justifications. Musk’s latest notice of termination is “based purely on statements made by a third party that, as Twitter has already noted, are plagued with contradictions and falsehoods and lack critical context,” according to William Savitt, a legal representative for Twitter.
“As was the case with your July 8, 2022, purported notice of termination, the purported termination set forth in your August 29, 2022 letter is invalid and wrongful under the Agreement,” Savitt wrote. “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. Twitter intends to enforce the Agreement and close the transaction on the price and terms agreed upon with the Musk Parties.”
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