Elon Musk believes he has new evidence that Twitter provided fraudulent information when he made his $44 billion takeover bid for the company.
Musk filed another notice requesting the termination of the Twitter deal on Monday, saying that the company knowingly withheld the fact it was not in compliance with laws. The filing referenced a Washington Post report on Twitter’s former chief security officer Peiter “Mudge” Zatko becoming a whistleblower. Musk's team cites allegations that the company was not complying with a 2011 FTC consent decree regarding data privacy, unfair trade practices, and consumer protection laws.
Zatko also claimed Twitter was in danger of being hacked, was built on illegally obtained data, and gave user data access to the Indian government. Furthermore, he alleged the company and executives ignored security issues.
This isn’t the first time Musk has accused Twitter of committing fraud. After Twitter sued him to force the completion of the sale, in early August, the tech entrepreneur filed a countersuit claiming that the company had committed a breach of contract and violation of the Texas Securities Act. His legal team claimed Twitter had issued “misrepresentations or omissions” over the number of real users, which vastly changed the value of the company.
Musk initially offered to buy Twitter in April 2022, after increasing his stake in the company. The Tesla CEO has been adamant about allowing more freedom of speech on the platform and fewer regulations, which has concerned advertisers that make up the majority of the platform’s revenue. However, even before the Musk takeover, many advertisers questioned the effectiveness of Twitter’s advertising, especially when it came to providing direct sales.
After both sides agreed to the deal, Musk claimed that Twitter has misrepresented key factors about the company. One of his main arguments has revolved around the number of bots on the platform, which the company has claimed is less than 5 percent of its user base. Musk believes the number to be much higher.
Security firm CHEQ recently conducted a study of 879,000 website visits to Twitter and determined that 12.7 percent of the traffic coming from Twitter ads is not from real accounts. In May, it conducted a similar study of 5.2 million website visits and found an 11.71 percent fraudulent rate.
Musk submitted an SEC filing on July 9 announcing his intent to pull out of the Twitter deal. Soon thereafter, Twitter sued Musk for breach of contract. The case will be heard in the Court of Chancery in Delaware beginning on October 17.