In a new filing with the U.S. Securities and Exchange Commission (SEC), Tesla CEO Elon Musk explained new reasons for terminating his $44 billion Twitter acquisition deal. Citing a whistleblower report, Musk’s lawyer said the allegations, known to the social media giant but undisclosed to Musk, show “widespread misconduct at Twitter.”
Elon Musk Offers More Reasons to Close Twitter Deal in New SEC Filing
Tesla CEO Elon Musk has found more reasons to terminate his $44 billion offer to buy Twitter Inc. Musk’s lawyersfiled a letter sent to Twitter on Monday with the U.S. Securities and Exchange Commission (SEC)giving additional notice of the deal’s termination.
In the letter sent to Twitter’s Chief Legal Officer Vijaya Gadde, Musk’s attorney detailed that.
Allegations concerning certain facts known to Twitter prior to and as of July 8, 2022, but not disclosed to the Musk parties prior to and as of that date, subsequently came to light and provided additional and clear grounds to terminate the merger agreement.
The letter references a whistleblower report filed by Peiter “Mudge” Zatko, Twitter’s former chief security officer, with Congress, the SEC, the Federal Trade Commission (FTC), and the Department of Justice (DOJ) on July 6. The report was recently published in the Washington Post.
Musk’s lawyer argued that “Zatco’s complaint alleges widespread misconduct at Twitter – all of which was disclosed to Twitter’s directors and senior executives, including (CEO) Parag Agrawal – and is likely to have a serious impact on Twitter’s business.” He stated.
For example, Zatco claimed that “Twitter is in serious noncompliance” under data privacy, unfair trade practices, and consumer protection laws and regulations. He further stated that Twitter is in violation of a consent decree it entered into with the FTC in 2011.
“Twitter’s platform is built upon the misappropriation and infringement of third party intellectual property in significant part,” the whistleblower alleged.
Twitter is uniquely vulnerable to systemic disruptions resulting from data center failures and malicious acts, a fact that Twitter’s leadership (including its CEO) has ignored and attempted to obfuscate.
In addition, Zatko explained that “Twitter’s SEC filings contain false statements of material fact or omit to state material facts necessary to make the statements not misleading.”
He further alleges that “Parag Agrawal, Twitter’s CEO, knowingly submitted a false and misleading report to Twitter’s Board of Directors to conceal obvious vulnerabilities in Twitter’s security and data protection infrastructure.”
A number of authorities in various countries are currently investigating the allegations by Zatco, Musk’s lawyer informed, adding.
Twitter will now also face a myriad of civil lawsuits alleging claims under various privacy and cybersecurity laws, state consumer protection laws, false advertising laws, intellectual property theft and misappropriation, and common law claims of unjust enrichment, fraud and breach of contract.
There are also intellectual property issues. The whistleblower “appears that Twitter did not acquire rights to Twitter’s core machine learning model, which the Mask parties understand to be fundamental to the Twitter platform itself,” the Mask attorneys wrote.
The case is scheduled to go to trial in the Delaware Chancery Court for five days beginning October 17. However, Musk’s lawyers are asking that the trial be postponed a month in light of the whistleblower disclosures.
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