Elon Musk Cites Twitter Whistleblower in New Attempt to Back Out of Acquisition

Elon Musk and his legal team have officially filed their second attempt to dissolve his deal to buy Twitter, citing recent whistleblower claims from Twitter’s former chief security officer. In the new filing, Musk’s team says, based on the whistleblower’s claims, the original deal itself was invalid.

Last week, Peiter “Mudge” Zatko came forward with a 200-page document, leveling a bevy of allegations at his former company. Among them are accusations that Twitter may not actually be deleting data of users who leave the platform, as it’s required to; that the company has dodged long-spanning legal obligations from a previous privacy settlement with the FTC, and that the company currently employs foreign intelligence agents. Zatko also alleged that Twitter has misled the public about its spam/bot account problem — something of particular interest to Musk.

In his original attempt to dissolve his buyout of the social media giant, Musk claimed in an SEC filing that Twitter didn’t provide sufficient data regarding the total number of spam and fake accounts, or “bots,” on the social media site. The filing noted that, “While Twitter has provided some information, that information has come with strings attached, use limitations or other artificial formatting features, which has rendered some of the information minimally useful to Mr. Musk and his advisors.”

Now, in his new filing, Musk says that the basis of the allegations made by Zatko “were known to Twitter and withheld” from Musk.

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“The Zatko Complaint alleges far-reaching misconduct at Twitter — all of which was disclosed to Twitter’s directors and senior executives, including Parag Agrawal — that is likely to have severe consequences for Twitter’s business,” the filing reads.

In addition to reasserting that Twitter is in breach on contract, the filing also takes a new legal tactic. In their letter, Musk’s lawyers claim that the original contract itself was in fact invalid, considering the circumstances.

“This also provides a basis for recission. Because these facts were known to Twitter and withheld from the Musk Parties, and because Twitter has since taken the position that the Merger Agreement remains in effect, the Musk Parties hereby provide this additional notice of termination of the Merger Agreement effective as of July 8, 2022 pursuant to Section 8.1(d)(i) thereof on the basis of the facts set forth above,” they wrote. “For the avoidance of doubt, these bases are in addition to, and not in lieu of, the bases for termination identified in the July 8 Termination Notice.”

Twitter responded Tuesday in a letter of their own to Musk’s legal representatives, writing that Musk’s claims are “invalid and wrongful.” Written by William Savitt of Wachtell, Lipton, Rosen & Katz, the letter emphasized that his case is “based solely on statements made by a third party that, as Twitter has previously stated, are riddled with inconsistencies and inaccuracies and lack important context.” Twitter intends to enforce the acquisition agreement.

Earlier this month, Musk himself sold almost $7 billion in Tesla stocks, saying the move was made to “avoid an emergency sale of Tesla stock” down the line.

The move came as a surprise to some, as Musk tweeted back in April that there were “no further TSLA sales planned after today,” after he sold roughly $8.4 billion worth of stocks to fund his initial deal to buy Twitter.

When asked online if he was done selling for the week, Musk confirmed so, and noted that he only sold as much as he did as a contingency plan, in the event that he’s forced to follow through on the agreement he struck with the company back in April.

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