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Friday, June 21, 2024

The Twitter Whistleblower Plays Right Into Elon Musk’s Hands

The claims are as shocking as they are urgent. Far from being a well-run tech company, Twitter’s servers are running out-of-date software, and security staff withheld the number of breaches of user privacy from executives—all while the company has made little effort to understand the number of bots on its platform.

Those are some of the allegations made by Peiter “Mudge” Zatko, Twitter’s former chief of security, in an explosive story in The Washington Post.

Zatko, who has been labeled a whistleblower, also claims that Twitter acceded to a request by the Indian government to place an agent on its payroll to monitor user data while protests roiled the country. “If accurate, the revelations that Twitter employed and gave user-data access to an agent of the Indian government, or any government, should worry anyone concerned about free expression online,” says Sarah McLaughlin of the Foundation for Individual Rights and Expression, a nonpartisan, nonprofit free-speech advocacy group.

The legitimacy of the claims are in dispute, but the bigger question is, what does this mean for Twitter’s ongoing dispute with Elon Musk, whose $44 billion takeover of the social media company is now part of an active court case.

Unusually for a company that has been disharmonious in the months since Musk launched his takeover bid, Twitter’s rank and file employees have not flocked to support Zatko’s whistleblowing efforts. “The feeling inside is that Mudge is a bitter shit trying to get revenge for the company outing him as the ineffective, sloppy employee he was,” says one, speaking on condition of anonymity. Another former Twitter employee, Ian Brown, has claimed he was asked by Zatko to send Twitter data “to a rando buddy of his in Texas,” with the implication that he’s not a trusted whistleblower when it comes to data integrity. Zatko did not respond immediately to a request for comment.

It’s notable that Zatko left the company in January but waited six months before blowing the whistle on the company’s alleged bad practices. “That's something I'm not clear about,” says Vasant Dhar, professor of information systems at the NYU Stern School of Business. “What took him six months to make up his mind that he was going to blow the whistle?” Dhar admits that speaking out isn’t a trivial position: “He’s squarely in the spotlight,” he says.

“I think it moves Musk one step closer to having a case that he was misled, so the terms of the deal as far as he’s concerned have been misrepresented,” says Dhar.

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“This throws gasoline into the fire around the bot issue with Musk and Twitter,” says Dan Ives, managing director and senior equity analyst at Wedbush Securities. “For the Musk camp this story is like a kid looking under the tree on Christmas morning.”

The allegations are also serious enough that Ives believes they would be a major focus for politicians looking into social media malpractice, and they are likely to lead to investigations.

“If what Zatko alleges is true, Twitter has violated its users’ trust and deceived the Federal Trade Commission and its directors,” says Christopher Bouzy of Bot Sentinel, whose access to Twitter data was threatened with removal this week. As for the timing of that warning, which would restrict Bouzy from collecting data about deactivated and suspended accounts that had not been an issue for the previous four years, “I do not think it's a coincidence,” Bouzy says. Twitter spokesperson Lindsay McCallum-Rémy says that the account referenced “was given a warning 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 that Zatko was fired from his job in January 2022 “for 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 riddled with inconsistencies and inaccuracies and lacks important context. Mr Zatko's allegations and opportunistic timing appear designed to capture attention and inflict harm on Twitter, its customers, and its shareholders. Security and privacy have long been company-wide priorities at Twitter and will continue to be.”

The fact that such claims have surfaced now shouldn’t be a huge surprise, no matter how significant the bombshell seems. “Allegations of concealment are a very common grounding for a fraud claim,” says Adam C. Pritchard, a professor of law at the University of Michigan specializing in corporate and securities law. “In this situation it gives Musk an opening to argue that even with due diligence, he wouldn’t have uncovered the issue.”

The circumstances around the revelations play into Musk’s hands, believes Pritchard. “That makes it easier for him to argue that it is a material adverse change rather than a topic he waived when he waived due diligence,” he says. “As always, it is all about negotiating leverage, and this gives Musk a bit more leverage.”

For Bouzy, it appears clear-cut. “I believe Elon Musk will use this latest revelation in court to prove Twitter executives misled him,” he says. “I am not a lawyer, but I don't see a scenario where the court forces Musk to buy Twitter if the allegations are true.”

Paul Fisher, who teaches negotiation at Oxford University’s Saïd Business School, also isn’t a lawyer. But he thinks the takeover is now a done deal—and not in the way Twitter wants. “I think it could well give Musk the way out he wants,” he says. “In any negotiation, particularly when it concerns the sale or purchase of an asset, transparency and getting all material information that might affect price onto the table is essential. In many cases, if the buyer determines that such representations were untrue at the time of the deal, the buyer may be entitled to terminate the agreement or certainly seek significant compensation from the seller.”

McCallum-Rémy declined to comment on how the revelations would affect the Musk takeover court case, or how Twitter intended to respond.

“I think Twitter is just going to stick to their guns,” says Dhar. “But they’ve got to start showing some evidence they were trying to do something about it, and the deal was in good faith.”

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