Elon Musk officially cited last week’s whistleblower charges against Twitter as a rationale for ending his $44 billion (£37.7 billion) acquisition of the social media company while also attempting to postpone a trial associated with the transaction. Representatives of the Tesla CEO said that Peiter Zatko, the organization’s former head of security, had violated the agreement by making charges of “far-reaching misbehaviour” on Twitter. In his whistleblower complaint against Twitter, Zatko—who was let go by the business in January—warned that it was “grossly negligent in several areas of information security.”
“These 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,” Musk’s lawyers said in a letter sent to Twitter on Monday and disclosed on Tuesday.
According to Zatko, the company’s board of directors was misinformed about these security breaches, about 30% of the company’s laptops inevitably blocked updates that covered security patches, and user data, as well as that from some of Twitter’s most well-known verified handles, is susceptible to hacks. According to the letter, Zatko’s charges had a “company material adverse effect” that significantly changed the company’s worth and invalidated the acquisition. These include breaking data privacy rules and regulations as well as a 2011 agreement with the US Federal Data Commission to strengthen customer data protection.
Twitter cited a number of additional instances of a material detrimental effect brought on by Zatko’s complaint, including the failure to protect the company’s machine learning models’ intellectual property rights and the oncoming flood of legal proceedings brought on by his discoveries. Additionally, Twitter claimed that it would not suffer a major unfavourable effect before the purchase closed, although Zatko’s assertions point to just such a circumstance. The case also claims that Parag Agrawal, the CEO of Twitter, violated the agreement by failing to inform the board of an internal report created by Zatko at the start of 2022. Additionally, it claims that Twitter committed fraud by concealing the security, privacy, and cybersecurity threats brought up by Zatko, giving Musk the right to sue Twitter.
A representative for Twitter claimed that Zatko’s assertions, which were used to support the letter, “are plagued with inconsistencies and falsehoods and lack critical context.” They added: “Contrary to the assertions in Mr Musk’s letter, Twitter has breached none of its representations or obligations under the agreement, and Twitter has not suffered and is not likely to suffer a company material adverse effect. Twitter intends to enforce the agreement and close the transaction on the price and terms agreed upon with Mr Musk.”