Judge allows Elon Musk to include whistleblower claims in Twitter battle

Elon Musk has won a victory in his legal battle against Twitter to pull out of his $44 billion (€44bn) purchase of the social media company, after a US judge said she would consider recently revealed whistleblower allegations by Twitter’s former security head as part of the case.

Following a three-hour hearing on Tuesday, chancellor Kathaleen McCormick of the Delaware Court of Chancery agreed to allow the billionaire Tesla chief to amend his complaint to include claims brought by former executive Pieter Zatko against Twitter.

Mr Zatko, who was fired by Twitter earlier this year and is represented by Whistleblower Aid, filed a complaint to US authorities in early July alleging that the social media group had misled users and regulators about its lax cyber security practices.

Since July, Mr Musk has sought to back out of buying Twitter, arguing it has underestimated the number of bots, or automated fake accounts, on the platform and misled regulators on the matter, in breach of the merger agreement struck in April. But last week his team asserted that, if true, Mr Zatko’s allegations would constitute fresh grounds to cancel the deal.

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In granting the request, the judge noted that the bar to revise a complaint was “low”.

However, she sided with Twitter in keeping the trial date for the week of October 17th, instead of granting the deferral to November as Mr Musk had requested. “I am convinced that even four weeks’ delay would risk further harm to Twitter too great to justify,” she wrote.

The decision could open Twitter up to fresh scrutiny over its cybersecurity controls, which have previously come under fire after hackers peddling a crypto scam took over the official accounts of hundreds of public figures and companies in July 2020.

“We are hopeful that winning the motion to amend takes us one step closer to the truth coming out in that courtroom,” said Musk lawyer Alex Spiro, following the ruling.

A Twitter spokesperson said: “We look forward to presenting our case in court beginning on October 17th and intend to close the transaction on the price and terms agreed upon with Mr Musk.”

In a court filing released on Wednesday alongside the decision, Mr Musk alleged that the grievances Mr Zatko first published in the Washington Post in July revealed Twitter’s 2021 annual report to be inaccurate. Mr Musk argues this nullifies the merger contract.

“Zatko’s complaint reveals extensive misconduct and misrepresentations in Twitter’s 2021 10-K related to Twitter’s compliance with binding FTC orders, mass intellectual property violations and inadequate security systems, among other matters,” Mr Musk’s complaint said.

Twitter has accused Mr Musk of simply getting cold feet over the deal given the market downturn, and repeatedly using “pretexts” to find a way out of what the company says are his obligations to close the deal.

During the hearing, lawyers for Twitter said Mr Zatko had raised his concerns over the company’s cybersecurity practices internally early in 2022 and that these were investigated and “determined to be without merit”.

They also accused Mr Zatko of later starting to “parrot” Mr Musk’s concerns over the separate issue of bots and spam, despite, they said, this not being the security chief’s area of expertise. This was “very, very strange”, they said.

Chancellor McCormick ordered Mr Musk to limit his new discovery demands on Twitter. “[D]iscovery can be made through targeted document discovery and minimal additional experts and fact witnesses,” she wrote in her opinion. — Copyright The Financial Times Limited 2022