Elon Musk Files Fresh Letter To Terminate Twitter Deal Over Whistleblower Claims

On Tuesday, 23 August, Twitter's former security chief Zatko alleged grave security malpractices at the company.

Elon Musk.

(Photo: The Quint)

Tesla CEO Elon Musk’s lawyers filed a fresh “Termination Letter” with the Securities and Exchange Commission on 29 August, citing the claims made by Twitter's former head of security Peiter “Mudge” Zatko as evidence that the platform misled Musk in the merger agreement.

On Tuesday, 23 August, Zatko alleged grave security malpractices at the company and the use of a misleading method to calculate the number of bots, fake accounts, and spam.

"Executives are incentivised (with bonuses of up to $10 million) to boost user counts rather than remove spam bots," he alleged, according to the Washington Post.

“[Zatko’s] allegations, if true, demonstrate that Twitter has breached the following provisions of the Merger Agreement, thereby giving the Musk Parties the right to terminate the Merger Agreement pursuant to its terms as more fully described below,” the letter says.

Will Zatko's Accusations Help?

The timing of Zatko's revelations is “amazing” for his case, Anat Alon-Beck, a law professor at Case Western Reserve University in Ohio, told The Guardian. “It’s almost like a script from the movies – this is very convenient for Musk,” she said.

Musk's argument largely relies on the claim that the number of spam, bots, and fake accounts is dramatically higher than the five percent stated by Twitter and can cause 'material adverse effect' (significant loss of value in the long term).

However, MAEs are rarely ever awarded by Delaware courts .

"Musk’s arguments do not appear to be very strong, though there is the wild card of whether Mudge has identified enough problems to qualify as an MAE."

Ann Lipton, a professor at Tulane Law School

Twitter had sued Musk in a Delaware court on 30 July, to force him to follow through with his proposed $44 Billion acquisition of the company. Musk had counter-sued shortly after and a five-day trial was scheduled, starting 17 October.

The billionaire's legal team repeatedly brought up Zatko's allegations in a hearing on 24 August to try and force Twitter to surrender large amounts of information, including user phone numbers and locations, to help with the upcoming legal battle, AFP reported.

Musk has subpoenaed Zatko seeking documents and communications on the company's spam and alleged security vulnerabilities, according to a court filing.

(With inputs from Reuters)