‘Smoking gun’: Twitter whistleblower’s claims could help Musk exit deal

In the complaint, Zatko said Twitter’s “Integrity Team” was reluctant to dig deeply into how many bot accounts were included in the platform’s customer base. That left the former security executive thinking “the company had no appetite to properly measure the prevalence of bots, in part because if the true number became public, it could harm the company’s value and image.”

Twitter said Zatko was fired for cause.

“Mr. Zatko was fired from his senior executive role at Twitter in January 2022 for ineffective leadership and poor performance,” the company said in a statement. “What we’ve seen so far is a false narrative about Twitter and our privacy and data security practices that is riddled with inconsistencies and inaccuracies and lacks important context.”

‘Opportunistic timing’

Twitter said Zatko’s allegations and “opportunistic timing” seemed “designed to capture attention and inflict harm on Twitter, its customers and its shareholders.” It added that “security and privacy have long been company-wide priorities at Twitter and will continue to be” and that it “fully stands by its prior statements about the percentage of bot and spam accounts on the service.”

It’s hard to tell whether Zatko’s claims significantly affect the Twitter-Musk case, said Jill Fisch, a University of Pennsylvania professor who tracks Delaware corporate law cases.

“Whistleblower complaints can raise serious issues or just be a bunch of sour grapes,” Fisch said. “We just don’t know at this point how credible” the complaint is, she said.

Bloomberg Intelligence litigation analyst Matthew Schettenhelm wrote in a note on Tuesday that the complaint “only marginally bolsters Musk’s case with Twitter.”

“The key: the report doesn’t show a direct misleading statement in Twitter’s SEC filings,” Schettenhelm wrote. “To the contrary, Zatko undercuts Musk’s central claim Twitter misled about its mDAU count. Zatko says Twitter’s ‘already doing a decent job excluding spam bots and other worthless accounts from its calculation of mDAU.‘”

He was referring to monetisable daily active users, a key industry metric.

Musk has argued that Twitter’s regulatory disclosures putting spam and bot accounts at no more than 5 per cent of its customer base were misleading. The Tesla chief executive officer has made public some of his analysis of the issue, which holds that a full third of Twitter’s more than 230 million users may fall into the bot category.

‘Game over’

Charles Elson, a retired University of Delaware professor who ran the school’s Weinberg Center for Corporate Governance, said the complaint, if accurate, would be a bombshell.

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“The bottom line question here is whether Twitter was entirely candid with Musk about these bots,” Elson said. “If it turns out they were not, it could be game over.”

Zatko was hired by former Twitter CEO Jack Dorsey. Musk’s legal team subpoenaed Dorsey on Monday, after serving Kayvon Beykpour, ex-head of consumer product at Twitter, and Bruce Falck, who oversaw product revenue. Both were fired.

Hamermesh noted that Zatko’s allegations hadn’t yet been verified and said it’s up to Delaware Chancery Court Judge Kathaleen St. J. McCormick to decide whether Musk’s abandonment of the deal was proper.

“It’s still a long way from the hole for Mr. Musk to sink that putt,” he said.

Bloomberg

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