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Elon Musk sends letter to Twitter to formally end their $44 billion merger deal

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Elon Musk has formally written to Twitter to end their $44 billion merger agreement, SEC documents have revealed.

Musk’s legal team filed a Schedule 13D document yesterday, confirming to the government agency that the serial entrepreneur, referred to in the document as “the reporting person,” had notified Twitter of his formal decision to withdraw from the agreement.

“On August 29, 2022, the Reporter’s advisors sent a letter (the ‘August 29 Termination Letter’) to Twitter (on behalf of the Reporter) to formally inform Twitter that the Reporter is terminating their merger agreement (the ‘Merger Agreement’),” it read. the document.

A cover letter addressed to the Twitter Chief Legal Officer of Musk’s team told the social media giant that “certain facts undisclosed to the Musk parties have come to light that provide additional and clear foundations on which to base the Merger Agreement.” to end’.

It comes after lawyers for the CEO of Tesla and SpaceX subpoenaed a former security chief at Twitter who alleged that company executives were aware of the site’s lax security and made false statements to the public.

Peiter Zatko, nicknamed Mudge in the hacking community, filed a scathing whistleblower complaint last month alleging that the social media giant was not candid about its security practices with the public and Musk.

He accused Twitter of years of “material misrepresentation and omissions” about security and privacy protections and claimed that company executives “lied” about the number of spam or bot accounts.

The company has vehemently denied these claims, but Musk’s legal team is now asking Zatko to appear for a September 9 statement in the billionaire’s ongoing legal battle to pull out of his $44 acquisition of Twitter. billion.

Lawyers have also requested more information about reports of privacy vulnerabilities that Zatko may have sent to Twitter CEO Parag Agrawal or other top employees, and are asking the company to provide more information about the section of Twitter’s annual report that discusses fake accounts.

The move comes as Musk prepares to face Twitter executives in federal court in October.

He has been claiming for weeks that company executives misled him about the number of fake accounts on the platform – which he relied on when he agreed to the takeover.

Zatko (pictured) last month filed a scathing whistleblower complaint alleging the social media giant lied to the public and Musk about its security practices

Elon Musk’s attorneys have subpoenaed former Twitter security chief Peiter Zatko to appear for testimony in the billionaire’s ongoing legal battle to get under his $44 billion deal to buy the company. Zatko filed a scathing whistleblower complaint last month alleging the social media giant lied to the public and Musk about its security practices.

In order for Musk's lawyers to use Zatko's arguments, he would either have to change his counterclaim or file a complaint with the Securities and Exchange Commission.

In order for Musk’s lawyers to use Zatko’s arguments, he would either have to change his counterclaim or file a complaint with the Securities and Exchange Commission.

Musk's legal team filed a Schedule 13D document yesterday, confirming to the government agency that the serial entrepreneur, referred to in the document as

Musk’s legal team filed a Schedule 13D document yesterday, confirming to the government agency that the serial entrepreneur, referred to in the document as “the reporting person,” had notified Twitter of his formal decision to withdraw from the agreement

Zatko, a former security chief at Twitter, filed his whistleblower complaint with the Securities and Exchange Commission, Federal Trade Commission and Department of Justice in July, after months of preparing it.

It featured a section titled ‘Lying about bots to Elon Musk’ Business Insider reports and accuses Twitter executives of misrepresenting how robust it measures and combats bots and spam accounts.

He specifically focused on a tweet posted by Agrawal in May stating that Twitter “was strongly encouraged to detect and remove as much spam as possible.”

The complaint says that “Agrawal’s tweet was a lie” and added: “Agrawal is well aware that Twitter executives are not incentivized to accurately ‘detect’ or report the total number of spam bots on the platform.”

Zatko went on to explain that while employees are encouraged not to count spam accounts as “active monetized users” — a metric Twitter gives to advertisers — they have little incentive to detect spam accounts among the large number of accounts that don’t count as mDAUs. counts.

By 2021, Zatko wrote, he asked Twitter’s head of site integrity roughly how many accounts are spam and was told, “We don’t really know.”

“Deliberate ignorance was the norm among the executive leadership team,” Zatko said in the whistleblower’s complaint.

He added that Twitter used “damply outdated, unchecked simple scripts plus overworked, inefficient, understaffed and reactive human teams” to detect bot accounts.

Zatko specifically pointed to a tweet posted by Agrawal in May, saying that Twitter was

Zatko specifically pointed to a tweet posted by Agrawal in May, saying that Twitter was “highly incentivized to detect and remove as much spam as possible,” saying it was a “lie.”

But if Musk wants to use any of those claims in his bid to get out of his takeover of the social media giant, he’ll either have to adjust his counterclaim against Twitter or file a complaint with the Securities and Exchange Commission — which also chairs more than three cases against the Tesla CEO.

To change the counterclaim against Twitter, the New York Times According to reports, Musk would need the approval of the Delaware Chancery Court — and the presiding judge, Kathleen St. J McCormick, may be reluctant to let him do so before the trial begins in October.

That would give Musk’s lawyers an opportunity to file a federal securities fraud lawsuit against Twitter, arguing that he has the right to walk away from the deal under laws governing the sale of securities.

They could argue that Zatko’s concerns should have been made public in Twitter’s latest annual report, a point Musk’s attorney, Alex Spiro, alluded to in a hearing last week.

But that could also get a bit murky, as the regulator is already investigating Tesla’s CEO after he delayed reporting his Twitter takeover and therefore failed to adequately warn that a takeover bid was imminent.

He has also faced skirmishes with the SEC in the past, with the regulatory agency demanding that all of Musk’s tweets be checked after accusing him of raising stock prices.

Recently, a US judge has criticized him for trying to escape a settlement with the SEC that required oversight of his Tesla tweets.

Musk will face Twitter executives in federal lawsuit in Delaware Chancery Court (pictured) in October

Musk will face Twitter executives in federal lawsuit in Delaware Chancery Court (pictured) in October

Still, Musk has seen some success in his efforts to get under his Twitter deal.

Last week, Judge Kathleen McCormick ruled that Twitter executives should release more data about his fake accounts to Tesla’s CEO.

She instructed Twitter to hand over data on 9,000 accounts the company audited in late 2021, opening the door to that information that could be used in Musk’s bid to end the $44 billion deal.

“Some of Plaintiff’s (Twitter) additional information appears to be warranted,” McCormick wrote, without elaborating, in her four-page ruling.

And on Wednesday, a letter revealed that in June the Securities and Exchange Commission asked the company about its method of calculating fake or spam accounts and “the underlying judgments and assumptions used by management.”

The law firm Wilson Sonsini of Palo Alto, Calif., replied to the SEC in a June 22 letter stating that the company believes it has sufficiently disclosed the methodology in its annual report filed for 2021.

The letter states that Twitter makes its estimates of fake accounts with an internal review of sample accounts.

The accounts are chosen at random and the employees follow a complex set of rules ‘defining spam and platform manipulation’.

An account is considered fake if it violates one or more of the rules, the letter said. The fake accounts are investigated by several trained employees.

The number of fake accounts “represents the average number of fake accounts or spam accounts in the samples during each monthly analysis period during a quarter,” the letter said.

It added that less than 5 percent of Twitter’s “money” daily active users were fake accounts in the fourth quarter of last year, the period the SEC had questioned.

Business leaders now say yes 238 million active monthly users and delete 1 million spam accounts daily.

The SEC is interested in both numbers, as Twitter uses them to attract advertisers, whose payments make up just over 90 percent of the company’s revenue.

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