sends letter to Twitter to formally end their $44B merger agreement after bombshell accusations by their former security chief Peiter Midge Zatko, according to SEC documents
According to SEC records, Elon Musk sends Twitter a letter to formally terminate their $44 billion merger agreement following explosive allegations made by its former security chief Peiter Midge Zatkoff.
According to the SEC, Musk has officially written to Twitter to stop the $44 billion takeover.
Yesterday, his attorneys filed a paperwork with the SEC confirming his decision.
Comes after Twitter’s former security chief filed a whistleblower lawsuit claiming the company deceived the public and Elon Musk about its security standards.
Musk has also claimed that the corporation misled him about the number of fraudulent accounts on the site, information on which he relied before deciding to purchase the company.
In October, a trial will determine whether the Tesla and SpaceX CEO is compelled to stand by his acquisition of the company.
SEC records disclose that Elon Musk has formally written to Twitter to terminate their $44 billion merger agreement.
Yesterday, Musk’s legal team filed a Schedule 13D letter verifying to the government agency that the serial entrepreneur, referred to in the document as “the Reporting Person,” had formally notified Twitter of his desire to withdraw from the arrangement.
The document stated, ‘On August 29, 2022, the Reporting Person’s advisors formally notified Twitter (on behalf of the Reporting Person) that the Reporting Person is terminating their merger agreement (the ‘Merger Agreement’)’
Musk’s team informed the social media giant in a letter sent to Twitter’s Chief Legal Officer that ‘new facts unknown to the Musk Parties have come to light and give additional and distinct grounds to terminate the Merger Agreement.’
It comes after the Tesla and SpaceX CEO’s attorneys subpoenaed a former Twitter security chief who said company management knew about the website’s deficient security and made fraudulent claims to the public.
Last month, Peiter Zatko, known in the hacker community as Mudge, submitted a devastating whistleblower complaint saying that the social media behemoth was not forthright with the public and Elon Musk on its security policies.
He said that Twitter officials have misled about the number of spam or bot accounts for years.
Musk’s legal team has asked Zatko to appear for a deposition on September 9 in the billionaire’s ongoing court struggle to withdraw his $44 billion takeover of Twitter. The corporation has categorically refuted these allegations.
Attorneys have also requested additional information about any reports about privacy vulnerabilities that Zatko may have sent to Twitter CEO Parag Agrawal or other top employees, and they have asked the company to provide more details about the section of its annual report that discusses fake accounts.
The move comes as Musk prepares to face Twitter officials in October in federal court.
He has maintained for weeks that firm executives deceived him over the quantity of bogus accounts on the network, information upon which he relied when he agreed to the acquisition.
Former Twitter security head Peiter Zatko has been subpoenaed to testify for a deposition in Elon Musk’s ongoing court struggle to break out of his $42 billion agreement to buy the firm. Last month, Zatko filed a devastating whistleblower case alleging Facebook misled to the public and Musk about its security policies.
Musk’s attorneys would need to revise their countersuit or file a complaint with the Securities and Exchange Commission in order to leverage Zatko’s claims.
After months of preparation, former Twitter security head Zatko submitted his whistleblower complaint to the Securities and Exchange Commission, Federal Trade Commission, and Department of Justice in July.
It includes a section labeled “Lying about Bots to Elon Musk” and accused Twitter executives of exaggerating the extent to which the company measures and combats bots and spam accounts.
He specifically criticized a tweet written by Agrawal in May, which stated that Twitter was’strongly incentivized to detect and eliminate as much spam as possible’
The complaint states, “Agrawal’s tweet was false,” and adds, “Agrawal is well aware that Twitter executives are not financially motivated to accurately “identify” or report spam bots on the network.”
Zatko continued by explaining that while staff are advised not to include spam accounts as’monetizable active users,’ a statistic Twitter supplies to advertisers, they have little motivation to find spam accounts among the vast number of accounts that do not count as mDAUs.
By 2021, Zatko said, he questioned Twitter’s head of site integrity about the approximate number of spam accounts and was told, “We don’t really know.”
In the whistleblower case, Zatko asserts that willful ignorance was the norm within the executive leadership team.
To detect bot accounts, Twitter employed “moistly obsolete, unmonitored, unsophisticated scripts in addition to overworked, inefficient, underfunded and reactionary human workers,” he said.
Zatko specifically referenced a tweet written by Agrawal in May in which he said Twitter was’strongly encouraged to detect and remove as much spam as possible’ and called it a ‘false’
Musk must either revise his countersuit against Twitter or file a complaint with the Securities and Exchange Commission, which is already overseeing three lawsuits against the Tesla chief executive.
Musk will need the Delaware Chancery Court’s permission to alter the countersuit against Twitter, according to the New York Times, and presiding judge Kathleen St J McCormick may be reluctant to allow him to do so before the trial begins in October.
Then, Musk’s attorneys would have the option of filing a federal securities fraud claim against Twitter, arguing that he has the right to withdraw from the deal under securities laws.
They could argue that Zatko’s worries should have been reported in Twitter’s most recent annual report; Musk’s attorney, Alex Spiro, referred to this possibility in a hearing last week.
The regulator is already probing the Tesla CEO because he delayed reporting his acquisition of Twitter and, as a result, failed to offer adequate warning that a takeover attempt was imminent.
Musk has also been involved in conflicts with the SEC in the past, with the agency mandating that all of his tweets be monitored after accusing him of manipulating stock prices.
Most recently, a U.S. judge criticized him for attempting to evade an SEC deal requiring control of his Tesla tweets.
In October, Musk will face Twitter executives in a federal trial at the Delaware Chancery Court (pictured).
Despite this, Musk has had some success in escaping his Twitter contract.
Judge Kathleen McCormick ordered last week that Twitter executives must provide the CEO of Tesla with further information regarding its false accounts.
She ordered Twitter to send over data on 9,000 accounts the company audited at the end of 2021, which paves the way for Musk’s effort to abandon the $44 billion deal to utilize this information.
In her four-page order, McCormick stated, “Some additional data from the plaintiff (Twitter) appears necessary.”
In June, the Securities and Exchange Commission inquired about the company’s process for determining fraudulent or spam accounts and “the underlying judgements and assumptions employed by management,” according to a letter released on Wednesday.
Wilson Sonsini of Palo Alto, California, responded to the SEC on June 22 with a letter stating that the company believes its 2021 annual report sufficiently discloses its methodology.
According to the letter, Twitter’s estimates of fake accounts are based on an internal analysis of sample accounts.
The accounts are selected at random, and staff apply a complicated set of procedures that “define spam and platform manipulation.”
The letter stated that an account is considered to be phony if it breaches one or more of the guidelines. Multiple trained staff are investigating the bogus accounts, it is stated.
The letter stated that the number of phony accounts “represents the average number of bogus or spam accounts in the samples during each monthly study period within the quarter.”
It said that less than 5 percent of Twitter’s’monetizable’ daily active users were phony accounts in the fourth quarter of 2012, the time questioned by the SEC.
Executives of the company currently claim that it has 238 million active monthly users and daily removal of 1 million spam accounts.
The SEC is interested in these numbers because Twitter uses them to attract advertisers, whose payments account for almost 90 percent of the company’s income.