According to paperwork from the SEC, Elon Musk has officially written to Twitter to terminate their $44 billion merger deal.
Musk’s legal team submitted a Schedule 13D letter to the government yesterday, attesting to the fact that the serial entrepreneur—referred to in the document as “the Reporting Person”—had officially informed Twitter of his intention to terminate the contract.
The paper stated: “On August 29, 2022, the Reporting Person’s advisers submitted a letter to Twitter (on the Reporting Person’s behalf) (the “August 29 Termination Letter”) officially alerting Twitter that the Reporting Person is terminating their merger agreement (the “Merger Agreement”).
It happens after the attorneys representing the CEOs of Tesla and SpaceX subpoenaed the former head of security at the social media giant, who said business leaders were aware of the site’s insufficient security and misled the public.
Peiter Zatko, often known as Mudge in the hacker community, submitted a devastating whistleblower lawsuit last month saying that Facebook has been secretive about its security policies to both Musk and the general public.
He said that Twitter officials “lied” about the amount of spam or bot accounts and accused the firm of years of “material deception and omissions” concerning security and privacy measures.
Even though the business has vehemently refuted these allegations, Musk’s legal team is now requesting that Zatko show up for a deposition on September 9 as part of the billionaire’s continuing legal fight to withdraw his $44 billion purchase of Twitter.
Additionally, lawyers have asked Twitter to provide more information about any privacy vulnerability reports it may have sent to Parag Agrawal, the CEO of Twitter, or other senior staff members.
They have also asked Twitter to provide more information about the section of its annual report that addresses fake accounts.
The action is being taken as Musk gets ready to square off with Twitter officials in federal court in October.
Since many weeks ago, he has maintained that firm officials deceived him about the quantity of fictitious accounts on the platform, which he relied upon to approve the purchase.
Former Twitter security head Zatko prepared his whistleblower case for months before submitting it to the Securities and Exchange Commission, Federal Trade Commission, and Department of Justice in July.
According to Business Insider, it featured a section labelled “Lying about Bots to Elon Musk” and accuses Twitter officials of exaggerating how thoroughly company monitors and eliminates bots and spam accounts.
He especially targeted Agrawal’s tweet from May, which said that Twitter was “highly encouraged to identify and eliminate as much spam as we possibly can.”
Agrawal “knows full well that Twitter executives are not motivated to correctly “identify” or report total spam bots on the network,” the lawsuit states, adding that “Agrawal’s post was a falsehood.”
While staff are urged not to classify spam accounts as “monetizable active users,” a measure Twitter supplies to advertisers, Zatko continued by saying that since there are so many accounts that do not qualify as mDAUs, there is no motivation for them to do so.
According to Zatko, when he queried Twitter’s head of site integrity about the proportion of spam accounts, he was told, “We don’t really know,” in 2021.
According to Zatko’s whistleblower report, the senior leadership team’s “deliberate ignorance” was the norm.
In order to identify bot accounts, he said, Twitter used “moistly obsolete, unmonitored basic scripts and overworked, inefficient, underfunded and reactionary human workers.”
However, Musk will need to either amend his countersuit against Twitter or lodge a complaint with the Securities and Exchange Commission, which is also supervising three cases against the Tesla CEO, if he intends to use any of those allegations in his attempt to back out of his acquisition of the social media giant.
The New York Times notes that Musk would need the Delaware Chancery Court’s approval to change the countersuit against Twitter, and that judge Kathleen St. J. McCormick may be hesitant to grant him permission before the trial begins in October.
Musk’s legal team would then have the option of suing Twitter for securities fraud on the grounds that he has the right to get out of the agreement under securities laws.
They could contend that Twitter’s most recent annual report should have included information on Zatko’s worries, which Musk’s lawyer, Alex Spiro, hinted at at a hearing last week.
But it might also become a little hazy since the regulator is already looking into the Tesla CEO because he failed to declare his purchase of Twitter on time and failed to give the company enough advance notice that a takeover offer was imminent.
He has also had run-ins with the SEC in the past, which demanded that all of Musk’s tweets be watched after accusing him of artificially raising stock prices.
Most recently, he was criticised by a U.S. court for attempting to evade a deal with the SEC that called for control of his Tesla tweets.
Nevertheless, Musk has had some success in his attempts to renegotiate his contract with Twitter.
Judge Kathleen McCormick ordered last week that Twitter officials must provide the Tesla CEO additional information regarding the company’s phoney accounts.
She ordered that Twitter provide over information on 9,000 accounts that the company reviewed by the end of 2021, opening the possibility for Musk to use the data in his attempt to renegotiate the $44 billion agreement.
In her four-page decision, McCormick said, “Some further data from plaintiff (Twitter) is necessary,” but she did not elaborate.
Additionally, a letter made public on Wednesday said that the Securities and Exchange Commission had questioned the business in June on its approach to identifying erroneous or spam accounts as well as “the underlying judgements and assumptions applied by management.”
The company believes that the methodology was adequately disclosed in its annual report submitted for 2021, according to the law firm Wilson Sonsini of Palo Alto, California, in response to the SEC in a letter dated June 22.
According to the letter, Twitter conducts an internal review of representative accounts to determine its estimates of false accounts.
The staff choose the accounts at random while adhering to a complicated set of guidelines “that define spam and platform manipulation.”
The letter said that if an account breaks one or more of the guidelines, it is presumed to be fake. Multiple qualified personnel are looking into the bogus accounts, it said.
According to the letter, the quantity of phoney accounts “represents the average false or spam accounts in the samples throughout each monthly study period within a quarter.”
Less than 5% of Twitter’s “monetizable” daily active users during the fourth quarter of last year, which the SEC had raised concerns about, were false accounts, it said.
According to company management, there are now 238 million active monthly users, and 1 million spam accounts are deleted every day.
Both numbers are of relevance to the SEC because Twitter utilises them to entice advertisers, whose payments account for little more than 90% of the business’s income.