Twitter Investors Back Musk Offer as Whistleblower Testifies

Twitter shareholders this week approved the $44 billion takeover bid by Elon Musk, voting the same day as whistleblower Peiter Zatko testified at a Senate Judiciary Committee hearing, telling lawmakers that the social media company’s leadership misled regulators about security failures. Senator Chuck Grassley (R-Iowa) was skeptical as to Twitter CEO Parag Agrawal keeping his job if Zatko’s allegations prove to be true, saying the executive “rejected this committee’s invitation by claiming that it would jeopardize Twitter’s ongoing litigation” with Musk. Twitter has categorically denied Zatko’s claims, which include foreign agents infiltrating Twitter’s workforce.

“Twitter is an immensely powerful platform that cannot afford gaping security vulnerabilities,” Judiciary Committee chairman Dick Durbin (D-Illinois) said during the hearing’s opening remarks.

Grassley added that “the whistleblower disclosures paint a very disturbing picture of a company that’s solely focused on profits at any expense, including at the expense of the safety and security of its users.” Lawmakers have raised concerns about potential Twitter security lapses exposing user data to foreign intelligence agencies.

At the hearing, Zatko reiterated his claims agents working for China and other governments may be employed by Twitter. “Last month, a former Twitter employee was found guilty of spying for Saudi Arabia by accessing private user information in exchange for money,” The Wall Street Journal reports. Zatko testified at Tuesday’s more than two-hour hearing that “Twitter’s security team ‘had been contacted and told that there was at least one agent of the MSS, which is one of China’s intelligence services, on the payroll inside Twitter.”

In what potentially exposes Twitter to costly liability, “Zatko also reiterated that Twitter had misled the Federal Trade Commission about its data practices and that it had violated the terms of a 2011 settlement it had reached with the agency,” per The New York Times.

WSJ reports that in June Zatko accepted a confidential $7 million settlement from Twitter. Although the settlement preceded his July whistleblower complaint, it raised questions about Zatko’s ongoing candor. During the hearing Zatko called Twitter “a hugely valuable service,” though other parts of his testimony supported Musk’s claims that the social media company misled him about the number of fake accounts on the service.

Last week, Musk won court approval to use Zatko’s accusations as part of his countersuit to cancel his $54.20 per share purchase offer. The case is set to be heard in a five-day trial in Delaware Chancery Court set to begin October 17.

Twitter investors overwhelmingly approved Musk’s original takeover terms, with more than 98.6 percent of votes cast in support of the deal at a special meeting on Tuesday. Twitter shares rose after the vote to close at  $41.74, according to WSJ.

Bloomberg reported “several hedge funds have purchased stock, options or bonds” betting that Musk will be forced to go through with the deal, as reprinted by Yahoo Finance, with Pentwater Capital Management and Greenlight Capital listed among those teeing up for the billionaire to lose at trial. Musk in August sold roughly $7 billion worth of [Tesla] stock, according to regulatory disclosures, and suggested he did so in case he is forced to buy Twitter,” WSJ writes.

The Twitter Whistleblower’s Testimony Has Senators Out for Blood, Wired, 9/14/22
Silicon Valley Can’t Keep Track of Your Data, The Washington Post, 9/15/22

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