Elon Musk cites Twitter whistleblower as new grounds to cancel $44bn deal

Elon Musk has seized on a whistleblower report by Twitter’s former security chief to bolster his legal fight to terminate his $44bn deal to buy the social media company.

Musk’s legal team wrote to Twitter executives on Monday, according to a filing released on Tuesday, claiming that if true, Peiter Zatko’s allegations breach several aspects of the merger agreement struck in April but which the billionaire has been seeking to abandon since July.

Zatko, known in cyber security circles as “Mudge”, was also served with a subpoena from Musk’s team over the weekend to testify in the case.

Until now, Musk’s legal efforts to extricate himself from the deal have centred on the scale of Twitter’s fake user problem. Monday’s letter outlines a much broader argument, suggesting that if Zatko’s claims are true, they give Musk the right to terminate the merger agreement on multiple points.

Twitter’s lawyers responded on Tuesday, stating the notice of termination was “invalid and wrongful under the agreement”. The letter added that it is based solely on statements made by a third party that “are riddled with inconsistencies and inaccuracies”.

Zatko, who was fired by Twitter earlier this year and is now represented by Whistleblower Aid, filed a complaint to the US authorities alleging that Twitter misled users and regulators about its cyber security defences. Twitter has previously refuted Zatko’s claims as a “false narrative”.

Zatko alleged that Twitter breached its obligations under a 2011 agreement with the FTC to protect user data and failed to disclose material information about security vulnerabilities to investors and its board.

His complaint was filed to the US Securities and Exchange Commission, the Department of Justice and the Federal Trade Commission as well as to members of Congress on July 6, two days before Musk announced he wanted to back out of his Twitter purchase.

“The facts supporting these breaches, which were withheld from the Musk parties but known to Twitter as of the date of the Merger Agreement and at the time of the July 8 Termination Notice, provided additional bases to terminate the Merger Agreement,” Musk’s lawyers wrote.

Twitter has long faced scrutiny over its cyber security controls, including after hackers peddling a crypto scam took over the official accounts of hundreds of public figures and companies in July 2020. Zatko was brought in by former chief executive Jack Dorsey in the wake of the hack.

Last week, Musk’s legal team issued a subpoena to Dorsey, who stepped down as Twitter’s chief executive in November, seeking any communications between him and executives over the handling of fake accounts. The case is scheduled to go to trial in October in the Delaware Court of Chancery.

Additional reporting by Hannah Murphy