Elon Musk has officially written to Twitter to end their $44 billion merger deal, SEC filings have revealed, citing “certain facts” he claims he was unaware of when he said. first declared his intention to step down on July 8.
Musk’s legal team filed a Schedule 13D document yesterday, confirming to the government agency that the serial entrepreneur, referred to in the document as “the declarant”, had notified Twitter of his formal decision to end his fusion.
‘On August 29, 2022, Reporter’s advisers sent a letter (the “August 29 Termination Letter”) to Twitter (on behalf of Reporter) formally notifying Twitter that Reporter is terminating its Merger Agreement (the ‘Merger Agreement’),” the document read.
A cover letter to Twitter’s chief legal officer from Musk’s team told the social media giant that “certain facts undisclosed to Musk’s parties (July 8) have come to light which provide additional and separate basis for terminate the merger agreement”.
It comes after lawyers for the CEO of Tesla and SpaceX subpoenaed a former Twitter security chief who claimed the company’s executives were aware of the site’s lax security and provided the public with false statements.
Peiter Zatko, nicknamed Mudge in the hacker community, filed a damning whistleblower complaint last month alleging the social media giant was not open to the public and to Musk about its security practices.
He accused Twitter of years of “material misrepresentations and omissions” regarding security and privacy, saying company executives “lied” about the number of spam or bot accounts.
The company has strongly denied the allegations, but Musk’s legal team is now asking Zatko to appear for deposition on Sept. 9 in the billionaire’s ongoing legal battle to walk away from his $44 billion Twitter takeover.
The attorneys also requested additional information about any privacy vulnerability reports that Zatko may have sent to Twitter CEO Parag Agrawal or other high-level employees and are asking the company to provide more information. information about the section of Twitter’s annual report that deals with fake accounts.
The move comes as Musk prepares to face Twitter executives in federal court in October.
He has argued for weeks that company executives misled him about the number of fake accounts on the platform – which he relied on when agreeing to the acquisition.
Elon Musk’s lawyers have subpoenaed former Twitter security chief Peiter Zatko for deposition in the billionaire’s ongoing legal battle to back out of his $44 billion deal to buy the company. Zatko filed a damning whistleblower complaint last month alleging the social media giant lied to the public and to Musk about its security practices
For Musk’s lawyers to use Zatko’s arguments, he would have to either amend his counterclaim or file a complaint with the Securities and Exchange Commission.
Musk’s legal team filed a Schedule 13D document yesterday, confirming to the government agency that the serial entrepreneur, referred to in the document as “the declarant”, had notified Twitter of his formal decision to step down. the agreement.
Zatko, a former Twitter security chief, filed his whistleblower complaint with the Securities and Exchange Commission, Federal Trade Commission and Justice Department in July after months of preparing for it.
It contained a section titled “Lie about bots to Elon Musk,” Business Insider reports, and accuses Twitter executives of misrepresenting how it measures and combats bots and spam accounts.
He specifically took aim at a tweet posted by Agrawal in May that said Twitter had a “strong incentive to detect and remove as much spam as possible”.
The complaint says “Agrawal’s tweet was a lie” and adds, “Agrawal knows full well that Twitter executives have no incentive to ‘accurately detect’ or report the total number of spam bots on the platform. -form”.
Zatko went on to explain that while employees are encouraged not to count spam accounts as “monetizable active users” – a metric provided by Twitter to advertisers – they have little incentive to detect spam accounts among the large number. accounts that do not count as mDAUs.
In 2021, Zatko wrote, he asked Twitter’s site integrity manager how many accounts were spam and was told, “We don’t really know.”
“Wilful ignorance was the norm within the management team,” Zatko claims in the whistleblower’s complaint.
He added that Twitter had deployed “simple, outdated and unmonitored scripts and overworked, inefficient, understaffed and reactive human teams” to detect bot accounts.
Zatko specifically pointed to a tweet posted by Agrawal in May that said Twitter had a “strong incentive to detect and remove as much spam as possible”, claiming it was a “lie”.
But if Musk wants to use any of those claims in his bid to back out of his acquisition of the social media giant, he’ll either have to amend his countersuit against Twitter or file a complaint with the Securities and Exchange Commission — which also presides over three cases against the CEO of Tesla.
In order to change the countersuit against Twitter, however, the New York Times reports, Musk would need permission from the Delaware Chancery Court — and presiding judge Kathleen St J McCormick might be reluctant to let him before the trial begins in october.
That would leave Musk’s attorneys open to filing a federal securities fraud lawsuit against Twitter, arguing that he has the right to walk away from the deal under laws governing the sale of securities.
They could argue that Zatko’s concerns should have been disclosed in Twitter’s latest annual report, a point Musk’s attorney Alex Spiro alluded to during a hearing last week.
But it could also get a little murky, as the regulator is already investigating the Tesla CEO after he delayed reporting his acquisition of Twitter, and so didn’t give enough warning that a takeover bid was looming.
He has also faced skirmishes with the SEC in the past, with the regulatory agency demanding that all of Musk’s tweets be monitored after accusing him of inflating stock prices.
More recently, a U.S. judge criticized him for trying to evade a settlement with the SEC requiring monitoring of his Tesla tweets.
Musk is set to face Twitter executives in a federal trial in Delaware Chancery Court (pictured) in October
Still, Musk has had some success in his efforts to get out of his Twitter deal.
Last week, Judge Kathleen McCormick ruled that Twitter executives must turn over more data to the Tesla CEO about his fake accounts.
She ordered Twitter to turn over data on 9,000 accounts audited by the firm at the end of 2021, which opens the door for that information to be used in Musk’s effort to walk away from the $44 billion deal.
“Some additional plaintiff (Twitter) data appears warranted,” McCormick wrote, without giving details, in his four-page ruling.
And a letter revealed Wednesday that the Securities and Exchange Commission in June questioned the company about its methodology for calculating fake or spam accounts and “the underlying judgments and assumptions used by management.”
Palo Alto, Calif.-based law firm Wilson Sonsini responded to the SEC in a June 22 letter stating that the company believed it had properly disclosed the methodology in its filed 2021 annual report.
The letter says Twitter makes its estimates of fake accounts with an internal review of sample accounts.
Accounts are chosen at random and employees use a complex set of rules “that define spam and platform manipulation”.
An account is considered fake if it violates one or more of the rules, the letter states. Fake accounts are investigated by several trained employees, he said.
The number of fake accounts “represents the average of fake accounts or spam in the samples during each monthly analysis period for a quarter,” the letter states.
He added that less than 5% of Twitter’s “monetizable” daily active users were fake accounts in the fourth quarter of last year, the period the SEC had surveyed.
Company executives now say he has 238 million monthly active users and removes 1 million spam accounts daily.
The SEC is interested in the two numbers because Twitter uses them to attract advertisers, whose payments make up just over 90% of the company’s revenue.
Elon Musk tries again to terminate $44 billion merger deal with Twitter citing ‘certain new facts’