'Give a Little Whistle': How the Twitter Revelations Could Help Elon Musk's Case

Zatko alleged that Twitter employed a misleading method to calculate the number of bots, fake accounts, and spam.

Twitter on Friday announced its second quarter results, showing an unexpected dip in revenue and a net loss of $270 million.

(Photo: The Quint)

Hours after news broke about Twitter's former head of security Peiter Zatko's allegations of grave security malpractices against the social media platform, Tesla CEO Elon Musk tweeted an image from Walt Disney's 1940 adaptation of Pinocchio with the words, "give a little whistle".

Musk's immediate and thinly-veiled reaction makes sense, considering Zatko's whistleblowing might end up helping his case in his upcoming trial against Twitter, which appears to have the upper hand so far.

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.

Musk's Lawyers Pounce on the Revelations

Apart from mishandling user data and allowing government surveillance, Zatko alleged that Twitter also employed a misleading method to calculate the number of bots, fake accounts, and spam.

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

Notably, the main reason Musk gave for backing out of the deal was Twitter's allegedly "false and misleading representations" about how many bots were on its platform.

The billionaire's legal team repeatedly brought up Zatko's allegations in a hearing on Wednesday 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.

"The way Mr Zatko puts it, management had no appetite to properly measure the prevalence of bot accounts," Musk's attorney Alex Spiro told Judge Kathaleen McCormick in a Delaware court.

Twitter maintained that it deceived nobody and that Musk didn't do his due diligence before offering to buy the company.

'Very Convenient for Musk'

Up until recently, Musk's argument has largely relied on the claim that the number of spam, bots, and fake accounts is dramatically higher than the 5 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 .

"That is an incredibly high standard: Delaware courts have almost never found an MAE. There is a rule of thumb that an MAE requires a 40 percent decrease in long-term profitability," legal columnist Matt Levine wrote in a column for Bloomberg.

However, 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.

Twitter's alleged failure to protect user data privacy can give Musk's team additional angles to pursue in his legal battle by providing a "different basis for fraud," Ann Lipton, a professor at Tulane Law School told Reuters.

"Volatility is helpful if you're not playing a strong hand. It creates some possibility that something crazy might happen," Eric Talley, a professor at Columbia Law School, told the agency.

(With inputs from AFP, Reuters, The Washington Post, and The Guardian)