Elon Musk calls the whistle blower lawsuit filed by the former head of Twitter security a "godsend."

 

Ex-security head for Twitter (TWTR) has made allegations in a whistle blower complaint that, if confirmed, might make Elon Musk's decision to back out of his $44 billion purchase of the social media business simpler.

Elon Musk calls it a "godsend."

 

In a 200-page complaint to federal authorities, Peiter "Mudge" Zatko, a well-known hacker who was fired in January, charged Twitter's top executives with breaking laws and regulations by concealing weak security and forgoing resources to fully comprehend the prevalence of fake accounts on the platform.

 The dispute between Musk and Twitter, which is suing him in an effort to get him to complete the acquisition, centers on the problem of bogus accounts.

 

The action, which is scheduled for trial in Delaware Chancery Court starting on October 17, has undergone a significant turn due to the whistleblower allegations surrounding fraudulent accounts. 

Before the accusations, several legal professionals believed that the seller-friendly merger agreement would sway the case in favor of Twitter, with Delaware's Chancellor authorizing Musk to proceed with the acquisition.

 

Robert Miller, a law professor at the University of Iowa, said of the allegations, "This alters everything." "For Musk, this is like a miracle. If the whistleblower's concerns are accurate, Musk will benefit greatly from them. I suggest custom created.

Musk hinted at second thoughts in a tweet a few weeks after deciding on April 25 to pay $54.20 per share for all of Twitter's outstanding stock. 

In the termination letter that followed, his attorneys accused Twitter of breaking the agreement by failing to disclose the techniques they had employed to determine that fewer than 5% of their 238 million monetizable daily active users, or " mDAUs," were fraudulent or spam accounts. According to Musk and his attorneys, they believe the number is larger.

 

The assertion made by Zatko that Twitter doesn't know how many of its users are spam or bot accounts and that its staff is disincentivized to find out is similar but separate.

 

Miller and two other legal experts tell Yahoo Finance that if Zatko's complaint that Twitter doesn't know the total number of its bots is true and results in a finding that Twitter cannot accurately estimate mDAUs, it would be simpler for Musk to accuse Twitter of fraud and use the fraud claim as justification for terminating the agreement. 

Musk previously had to contend that he renounced his right to additional due diligence when he claimed that Twitter had violated a contractual obligation to provide information by failing to provide the evidence supporting its estimate. 

Musk would also have difficulty demonstrating that Twitter's regulatory filings misrepresented its mDAUs without access to Twitter's data.