Tesla CEO Elon Musk’s legal team argues that accusations by Twitter’s former security chief give him reason to back out of his deal to buy Twitter. Here, Musk speaks at a meeting of energy, oil and gas executives in Norway on August 29.
CARINA JOHANSEN/NTB/AFP via Getty Images
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CARINA JOHANSEN/NTB/AFP via Getty Images
Tesla CEO Elon Musk’s legal team argues that accusations by Twitter’s former security chief give him reason to back out of his deal to buy Twitter. Here, Musk speaks at a meeting of energy, oil and gas executives in Norway on August 29.
CARINA JOHANSEN/NTB/AFP via Getty Images
Billionaire Elon Musk’s chances of walking away unscathed from his commitment to buy Twitter just got better, thanks to the latest allegations from the company’s former security chief.
Twitter looks like a cybersecurity dumpster fire in a whistleblower complaint filed with federal regulators by Peiter Zatko. He complains about lax security practices that put users’ personal data at risk and the social media company at risk of violating a settlement agreement with federal regulators. It also alleges that the Indian government forced Twitter to hire two government agents who had access to sensitive data.
Soon after Zatko’s concerns became public, Musk referenced them in the new legal claims. Tesla’s CEO now argues that Twitter is damaged goods and that by hiding such egregious problems, it has committed fraud.
Twitter calls Zatko’s complaints inaccurate, inconsistent and opportunistic.
Twitter sued Musk in July after he tried to scuttle a deal to buy the company for $44 billion. Musk claimed that the company had underestimated the prevalence of bots — or spam accounts — on its platform, and that was the justification for his change of heart.
Given that Musk waived due diligence when he signed the deal — not to mention that it was he, not the company, that had sought the buyout — many experts believed he had a weak legal case.
His legal claims “just always seemed like an incredibly long argument to begin with,” said Ann Lipton, a professor of business and securities law at Tulane University. “The other charges — data security and intellectual property issues — they at least have a lot more potential.”
The trial is scheduled to begin Oct. 17 in Delaware. Musk has asked the judge for a delay so his legal team can gather more information about what happened inside Twitter.
Twitter has argued that any delay hurts its business and shareholders.
Why Musk has a better chance of walking away from the deal
Zatko, who also developed his own hacker Mudge, worked as Twitter’s chief security officer from 2020 until January. During that time, he says, company executives — including CEO Parag Agrawal — ignored his warnings about serious security flaws. In a whistleblower complaint filed with the Securities and Exchange Commission, the Federal Trade Commission and the Department of Justice, Zatko alleges that executives ignored these problems.
Twitter said Zatko’s complaint is a “false narrative” and inaccurate and that he was fired for poor performance.
The company is under an FTC consent agreement signed in 2011 after hackers repeatedly seized control and tweeted from a handful of user accounts. At the time, the agency said Twitter “failed to take reasonable steps” to protect its system. The agreement requires the company to maintain a comprehensive security system and be honest with users about the extent to which it protects their personal information.
After Zatko’s allegations became public, Musk sent a new letter to terminate the contract to buy Twitter. His lawyers argue that, if the allegations are true, the FTC could fine Twitter millions of dollars for violating the consent agreement.
“Twitter has already paid a $150 million fine for violating an aspect of that decree, and Facebook recently paid 5 billion dollars for similar violations of user data,” the letter says.
This previously hidden risk gives Musk the right to walk away, he says.
The whistleblower complaint has also caught the attention of Congress
Zatko is scheduled to be deposed by Musk’s lawyers on September 9. Next week, he will testify before the Senate Judiciary Committee.
If Zatko’s allegations are true, “they could indicate dangerous privacy and data security risks for Twitter users around the world,” top lawmakers on the committee, Democrat Dick Durbin of Illinois and Republican Chuck Durbin, said in a statement. Grassley of Iowa, pledging. the committee would “put an end to these alarming allegations.”
The senators have also asked the FTC to investigate Twitter. The agency declined to comment.
