“This adds fuel to the fire around the Musk and Twitter bots,” says Dan Ives, managing director and senior equity analyst at Wedbush Securities. “For the Musk camp, this story is like a child looking under the tree on Christmas morning.”
The allegations are also serious enough that Ives believes they would be a major focus for politicians scrutinizing the misuse of social media and would likely lead to investigations.
“If what Zatko alleges is true, Twitter has violated the trust of its users and misled the Federal Trade Commission and its directors,” says Christopher Bouzy of Bot Sentinel, whose access to Twitter data was threatened with removal this week. As for the timing of that warning, which would have restricted Bouzy from collecting data about disabled and suspended accounts that hadn’t been a problem for the previous four years, “I don’t think it’s a coincidence,” says Bouzy. Twitter spokeswoman Lindsay McCallum-Rémy says the referenced account “was given a warning about our breach Developer Policy”, which was the result of a routine review.
Whether the allegations are true or not is the main question. McCallum-Rémy says Zatko was fired in January 2022 “for ineffective leadership and poor performance.” Addressing the allegations, McCallum-Rémy says, “What we’ve seen so far is a false narrative about Twitter and our privacy and data security practices that is filled with inconsistencies and inaccuracies and lacks important context. Accusations and opportunistic timing of Mr. Zatko appears to be designed to attract attention and cause harm to Twitter, its customers and its shareholders. Security and privacy have long been company-wide priorities at Twitter and will continue to be.”
That such claims have now surfaced should not come as a huge surprise, however significant the bombshell may seem. “Allegations of concealment are a very common basis for a fraud claim,” says Adam C. Pritchard, a University of Michigan law professor specializing in corporate and securities law. “In this situation it gives Musk an opening to argue that even with due diligence, he would not have disclosed the matter.”
The circumstances surrounding the revelations play into Musk’s hands, Pritchard believes. “That makes it easier for him to argue that it’s a material adverse change and not a subject that he waived when he waived due diligence,” he says. “As always, it’s all about negotiating leverage, and this gives Musk a little more leverage.”
For Bouzy, it seems obvious. “I believe that Elon Musk will use this latest revelation in court to prove that Twitter executives have misled him,” he says. “I’m not a lawyer, but I don’t see a scenario where a court forces Musk to buy Twitter if the allegations are true.”
Paul Fisher, who teaches negotiation at Oxford University’s Saïd Business School, is also not a lawyer. But he thinks the takeover is now a done deal — and not the way Twitter wants it. “I think it could give Musk the path he wants,” he says. “In any negotiation, especially when it involves the sale or purchase of an asset, transparency and getting all material information that could affect the price on the table is essential. In many cases, if the buyer determines that such statements were untrue at the time of the agreement, the buyer may be entitled to terminate the agreement or, of course, seek substantial compensation from the seller.”
McCallum-Rémy declined to comment on how the revelations would affect Musk’s takeover lawsuit, or how Twitter intended to respond.
“I think Twitter is just going to stick to their guns,” Dhar says. “But they have to start showing some evidence that they were trying to do something about it and the agreement was in good faith.”
