In an attempt to wriggle out of his $44 billion deal to buy Twitter, Elon Musk and his lawyers made broad claims that Twitter was lying about how much spam was on the platform.
This was never a great legal rationale for getting out of a binding merger agreement. The contract didn’t even mention spam, bots, or Twitter’s monetizable daily active user (mDAU) metric.
But now whistleblower Peiter Zatko, known as Mudge, has given Musk a possible way out of his deal. It has nothing to do with bots.
Twitter’s whistleblower problem
In a whistleblower complaint (pdf) filed with the US Securities and Exchange Commission, Zatko largely supports Twitter’s argument about its user base, writing that mDAU is “more or less Twitter’s best approximation of the set of accounts that aren’t bots.”
The crux of his complaint, however, focused on what he sees as Twitter’s security and data privacy failures. Among other things, Zatko claimed that half of Twitter employees had access to system-wide controls, and that Twitter misused data in violation of its 2011 consent decree with the US Federal Trade Commission.
On Aug. 30, Musk’s legal team sent a second letter of termination to Twitter, alleging that Zatko’s complaint raises “widespread, egregious violations of the data privacy protections” that would be grounds to terminate the agreement. Musk’s lawyers say the new revelations both amount to a “material adverse effect” on Musk’s ability to run the company profitably in the future, and also qualify as fraudulent misrepresentations and omissions in the merger agreement. Twitter’s lawyers responded by calling the new termination letter “invalid and wrongful.”
A possible lifeline for Elon Musk
Musk was on weak ground with his bot claims, but Zatko’s allegations will now become a central point of argument.
It won’t be necessarily a strong argument, given that Musk never voiced concerns about Twitter’s security or data privacy earlier. But it is a possible lifeline—and certainly a better line of attack than the one about bots. Come October, when the trial commences, expect Musk’s attorneys to put Zatko’s complaint front and center.