“If Zatko’s allegations are true, Twitter has violated the trust of its users and misled the Federal Trade Commission and its directors,” says Christopher Bouzy of Bot Sentinel, whose access to Twitter data was threatened with withdrawal this week. As for the timing of that notice, which would restrict Bouzy from collecting data on disabled and suspended accounts that hadn’t been a problem in the previous four years, “I don’t think it’s a coincidence,” Bouzy says. Twitter spokeswoman Lindsay McCallum-Rémy says the account in question “received a notice for violating our Developer policy”, which was the result of a routine review.
Whether the allegations are true or not is the key question. McCallum-Rémy says Zatko was fired from his job in January 2022 “due to ineffective leadership and poor performance.” Addressing the allegations, McCallum-Rémy says, “What we’ve seen so far is a false narrative about Twitter and our privacy and data security practices that is full of inconsistencies and inaccuracies and lacks important context. The allegations Mr. Zatko’s and opportunistic timing seem designed to grab attention and hurt Twitter, its customers and its shareholders.Security and privacy have long been company-wide priorities at Twitter and they will continue to be.”
That these claims have surfaced now shouldn’t come as much of a surprise, as big a bombshell as it sounds. “Allegations of concealment are a very common basis for a fraud claim,” says Adam C. Pritchard, a University of Michigan law professor who specializes in corporate and securities law. “In this situation, Musk has an opportunity to argue that, even with due diligence, he would not have discovered the problem.”
The circumstances surrounding the revelations play into Musk’s hands, Pritchard believes. “This makes it easier for him to argue that this is a material adverse change rather than an issue that he waived when he waived due diligence,” he says. “As always, it’s about trading leverage, and this gives Musk a little more leverage.”
For Bouzy, it seems clear. “I think Elon Musk will use this latest revelation in court to prove that Twitter executives misled him,” he says. “I’m not a lawyer, but I don’t see a scenario where the court will force Musk to buy Twitter if the allegations are true.”
Paul Fisher, who teaches negotiation at Oxford University’s Saïd Business School, is also not a lawyer. But he believes the acquisition is now a done deal, and not in the way Twitter wants. “I think it could give Musk the exit he wants,” he says. “In any negotiation, especially when it comes to the sale or purchase of an asset, transparency and putting on the table all material information that could affect the price is essential. In many cases, if the buyer determines that these statements were false at the time of the agreement, the buyer may be entitled to terminate the agreement or certainly to seek significant compensation from the seller.”
McCallum-Rémy declined to comment on how the revelations would affect Musk’s takeover court case or how Twitter intended to respond.
“I think Twitter is just going to stick to its guns,” says Dhar. “But they have to start showing some evidence that they were trying to do something about it, and the deal was in good faith.”