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Elon Musk Cites Whistleblower Claims in Latest Letter of Termination of Twitter Deal

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Published: August 31, 2022
Elon-Musk-Twitter-Deal-Peiter-Mudge-Zatko-Getty-Images-1240649087
This illustration photo taken May 13, 2022, displays Elon Musk's Twitter account with a Twitter logo in the background in Los Angeles. Musk is citing claims by Twitter whistleblower, Peiter “Mudge” Zatko, in his most recent letter to Twitter attempting to terminate his purchase deal. (Image: CHRIS DELMAS/AFP via Getty Images) In an early morning tweet, Musk said the $44 billion takeover was "temporarily on hold," pending questions over the social media company's estimates of the number of fake accounts or "bots." That sent Twitter's stock plunging 25 percent. (Photo by Chris DELMAS / AFP) (Photo by CHRIS DELMAS/AFP via Getty Images)

In his attempt to terminate his $44-billion deal to purchase Twitter, on Aug. 30 Elon Musk issued a new letter of deal termination to the social media company, citing recent claims by a Twitter whistleblower.

The whistleblower himself is the former head of Twitter’s own security, Peiter “Mudge” Zatko, who claimed the company had “extreme, egregious deficiencies.” Twitter defended itself against Musk’s attempts, stating it is “invalid and wrongful under” the deal made.

Back and forth with Twitter

On Aug. 23, Zatko claimed that Twitter allegedly led federal regulators astray regarding the company’s security risks. 

According to Zatko’s complaint — obtained by CNBC — he “witnessed senior executives engaging in deceitful and/or misleading communications affecting Board members, users and shareholders” several times in 2021, when Twitter CEO Parag Agrawal supposedly asked Zatko to send false documents.

Shortly after being terminated, Zatko claimed that Twitter did not address “four key issues,” including antiquated software without basic security measures, “gross problems” on who has access to control systems and data, faulty internal processes and a “volume and frequency of security incidents impacting a large number of users’ data that is frankly stunning.”

Zatko also claimed that a tweet by Agrawal about Twitter being “strongly incentivized to detect and remove as much spam as we possibly can, every single day” was “a lie,” adding that the company’s executives are not encouraged to find bots and senior management has no care towards determining the scale of bot accounts, all due to a fear of public shaming.

One of Zatko’s lawyers said that he had no contact with Musk.

Regardless, Musk decided to subpoena Zatko to search for documents and communications on Twitter’s supposed wrongdoings.

“We have already issued a subpoena for Mr. Zatko, and we found his exit and that of other key employees curious in light of what we have been finding,” Alex Spiro of Quinn Emanuel, an attorney for Musk, told CNBC. 

The whistleblower claims give Musk the opportunity to escape the $44-billion buyout ,which he decided to end in July. Previously, Musk had to fend the company off using claims that he was misled by Twitter about the amount of bot and spam accounts online, which are claimed to be less than five percent of all of Twitter’s accounts.

Should the allegations of Twitter’s misconduct be proven true, the company could be found guilty of breaching provisions of the merger agreement with Musk, according to Musk and his legal team.

The legal team published a letter to Twitter that contained Zatko’s claims, alleging that they have more grounds to justify the abandonment of Musk’s buyout of the company.

However, according to Ann Lipton, professor at Tulane University Law School, it is not yet determined whether the judge would allow Musk to proceed with Zatko’s claims, due to the tight schedule of the case and Musk waiving due diligence prior to signing the deal contract.

Twitter has fired back at Musk, saying in its regulatory filing that the termination notice was null. An attorney for the company also said that Musk’s eagerness to use spam as his means to opt out of the purchase deal was “legally irrelevant,” as Twitter claimed its spam counts were only estimated.

“We are reviewing the redacted claims that have been published, but what we’ve seen so far is a false narrative that is riddled with inconsistencies and inaccuracies, and presented without important context,” Agrawal wrote, according to CNN.

“Given the spotlight on Twitter at the moment, we can assume that we will continue to see more headlines in the coming days — this will only make our work harder,” he added. “I know that all of you take a lot of pride in the work we do together and in the values that guide us. We will pursue all paths to defend our integrity as a company and set the record straight.”

Following the news, Twitter’s shares appeared to have fallen more than five percent in morning trading.

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