Nearly two months ago, Elon Musk told Twitter that he wanted to back out of his deal to buy the social network, largely based on his claim that Twitter was not disclosing the true extent of its spam and bot problem.
Now, Musk’s lawyers have cited allegations made by a former Twitter executive, whom the company fired earlier this year, that provide “additional and distinct grounds” for terminating the tech mogul’s deal to buy Twitter for $44 billion. .
“Although the Musk Parties believe that this termination notice is not legally necessary to terminate the Merger Agreement because they have already validly terminated it pursuant to the July 8 Termination Notice, the Musk Parties are delivering this termination notice additional in the event the July 8 Termination Agreement notice is found to be invalid for any reason,” said an August 29 letter from Musk’s attorneys to Twitter legal director Vijaya Gadde. The letter was disclosed in a SEC filing.
Peiter “Mudge” Zatko, who served as Twitter’s chief security officer before being fired in January 2022, filed a complaint with the SEC accusing Twitter of misleading shareholders, alleging that it failed to disclose “extreme and egregious deficiencies” in your security practices. He also alleged in an FTC complaint that the company violated a 2010 agreement with the agency to protect user data.
Among other things, Zatko also alleged that Twitter’s platform relies heavily on misappropriated third-party intellectual property; that Twitter gave in to the Indian government’s demands that its agents be hired by the company and have access to Twitter user information; and that Twitter is vulnerable to systemic disruption resulting from data center failures or malicious actors, something CEO Parag Agrawal and other top executives ignored and tried to obfuscate.
“The facts supporting these breaches, which were withheld from the Musk parties but made known to Twitter as of the date of the Merger Agreement and at the time of the July 8 Termination Notice, provided additional grounds for terminating the Merger Agreement as of of that date and provide additional grounds for terminating the Merger Agreement today if the termination of the Merger Agreement by the Musk Parties pursuant to the July 8 Termination Notice is found to be invalid for any reason,” Musk’s lawyers said in the letter.
Twitter has said that Zatko’s allegations represent “a false narrative about Twitter and our privacy and data security practices that is riddled with inconsistencies and inaccuracies and lacks significant context.” In a statement last week, a company representative said in a statement: “Mr. Zatko’s accusations and opportunistic timing seem designed to grab attention and inflict damage on Twitter, its customers and shareholders. Security and privacy have long been company-wide priorities at Twitter and will continue to be so.”
Musk and Twitter are locked in a legal battle, playing out in Delaware Chancery Court, in which Twitter seeks to force Musk to abide by the original purchase terms.
On July 8, Musk’s legal team informed the company that it wanted to void the deal due to Twitter’s alleged inability to prove the claim that less than 5% of active users are spambots or fake accounts. Twitter sued Musk on July 12, arguing that Musk is looking for an excuse to back out of the deal after his personal net worth fell as Tesla’s share price fell.