Elon Musk cites Twitter whistleblower as new reasons for scrapping a $44 billion deal

Elon Musk has used a whistleblower report by the former Twitter security chief to advance his legal fight to end his $44 billion deal to buy the social media company.

Musk’s legal team wrote to Twitter executives on Monday, according to a filing Tuesday, claiming that, if true, Peter Zatko’s allegations violate many aspects of the merger agreement struck in April, which the billionaire has been seeking to abandon since July.

Later on Tuesday, the Tesla boss also requested a delay in the trial, which is scheduled for October in Delaware court.

Zatko, known in cybersecurity circles as “Mudge,” received a subpoena from Musk’s team over the weekend to testify in the case.

So far, Musk’s legal efforts to get himself out of the deal have focused on the scale of the fake Twitter user’s problem. Monday’s letter lays out a much broader argument, suggesting that if Zatko’s allegations are true, it would give the billionaire the right to terminate the merger agreement on multiple points.

Twitter’s lawyers responded on Tuesday, saying the termination notice was “invalid and unlawful under the agreement.” They said the notice was based solely on statements made by a third party that were “full of contradictions and inaccuracies.”

Zatko, who was fired by Twitter earlier this year and is now represented by Whistleblower Aid, has filed a complaint with US authorities alleging that the social media company misled users and regulators about its cybersecurity defenses.

Zatko alleged that Twitter violated its obligations under a 2011 agreement with the Federal Trade Commission to protect user data and failed to disclose material information about security vulnerabilities to investors and its board of directors. As a result, Musk’s legal team argues that the platform could face a significant fine, with “material, if not existential, consequences for Twitter’s business.”

In response, the social network said it “has not breached any of its representations or obligations under the agreement, Twitter has not been harmed and is not likely to experience a material negative impact on the company.” She has consistently defended her disclosures about fake users from Musk’s arguments that she did not report the number of spam and fraudulent accounts.

Zatko’s complaint was filed with the US Securities and Exchange Commission, the Department of Justice and the Federal Trade Commission as well as members of Congress on July 6, two days before Musk announced his desire to back out of his deal with Twitter.

Musk’s lawyers wrote: “The facts supporting these violations, which were withheld from Musk’s parties but known on 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.”

Anne Lipton, a professor of business law at Tulane University in New Orleans, said Musk should show that the problems the former security chief alleged “will have a significant, long-term impact on Twitter’s finances.”

It relies a lot on Zatko’s complaint, but Zatko already agrees with Twitter that [audience] The scale is accurately reported. Where [user numbers are] Almost everything that has been sued so far, it all puts Musk in an awkward position.”

Twitter has faced a lengthy scrutiny over its cybersecurity controls, including after hackers who spread a crypto scam seized the official accounts of hundreds of public figures and companies in July 2020.

Musk’s legal team last week issued a subpoena for Dorsey, who resigned as Twitter’s chief in November, seeking any communications between him and executives about dealing with fake accounts.

Dorsey is just one of dozens of Silicon Valley executives who may be drawn to the escalating legal battle, as the billionaire and the platform search for evidence to back their cases.

Additional reporting by Hannah Murphy

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