- Title: Twitter whistleblower could help Musk with legal battle
- Date: 24th August 2022
- Summary: SAN FRANCISCO, CALIFORNIA, UNITED STATES (FILE) (REUTERS) PERSON SCROLLING THROUGH TWITTER ON A MOBILE PHONE
- Embargoed: 7th September 2022 02:43
- Keywords: Elon Musk Twitter bots security whistleblower
- Location: VARIOUS
- City: VARIOUS
- Country: USA
- Topics: Company News Markets,Economic Events,United States
- Reuters ID: LVA00E023823082022RP1
- Aspect Ratio: 16:9
- Story Text: A whistleblower's complaint that Twitter Inc. misled federal regulators about the company's security risks could provide Elon Musk with fresh ammunition in his bid to get out of buying the company for $44 billion.
Until now, Musk's legal showdown with Twitter has primarily centered around claims that the company misled the billionaire about the number of bot and spam accounts on its platform.
"While Musk has repeatedly complained about the number of bots on the platform, he really hasn't been able to provide any evidence outside of his own experience. And now he can use these allegations really to bolster his argument," Jasmine Enberg, an analyst with Insider Intelligence said.
The whistleblower complaint by Twitter's former security chief Peiter Zatko gives Musk new angles to pursue in his legal battle, such as claims that Twitter failed to disclose weaknesses in its security and data privacy.
"Even if these allegations turn out to be false, it could still lead to a lot of criticism, some of which we're seeing right now, as well as potential scrutiny from not only consumers and the media, but even from lawmakers," Enberg said.
It is not clear if and how Musk's team will use the whistleblower's information, although Musk's lawyer, Alex Spiro with Quinn Emanuel Urquhart & Sullivan, said on Tuesday that a subpoena had been issued to Zatko.
"We found his exit and that of other key employees curious in light of what we have been finding," Spiro said in a statement.
On Tuesday, Twitter's stock was down about 5.9% in late trading at $40.44 a share.
"I don't think that there is a really fantastic outcome for Twitter at this point....every single allegation and new revelation really serves to add more distraction at a time when it really should be focusing on fixing a lot of the problems in terms of its user growth and revenue growth," Enberg said.
Musk, the world's richest person and the chief executive of electric vehicle maker Tesla Inc, told Twitter in July that he was ending the agreement to buy the company for $54.20 per share.
Musk accused Twitter of fraudulently misrepresenting the true number of spam and bot accounts on its social media platform, which the company has estimated at 5% in corporate filings. Musk said he relied on those filings when he offered to buy the company.
Twitter and Musk have since sued each other, with Twitter asking a judge on the Delaware Court of Chancery to order Musk to close the deal. A trial is set to start on Oct. 17.
On Wednesday, Chancellor Kathaleen McCormick will hear arguments by the two sides over access to documents as part of the discovery process. Legal experts said Musk might raise the whistleblower complaint and indicate how his team might use the allegations.
Zatko's whistleblower complaint, which was made public on Tuesday, claimed that Twitter had falsely told regulators that it had a solid security plan.
Zatko said he had warned colleagues that half the company's servers were running out-of-date and vulnerable software, according to a redacted version of his complaint.
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