David Bridges
- Experts told Insider the Twitter whistleblower’s hearing did little to aid Elon Musk’s legal case.
- During the Senate hearing, Peiter Zatko alleged that Twitter prioritized profits over security.
- Musk’s legal team has amended its countersuit against Twitter to include Zatko’s claims.
Elon Musk’s legal team amended its countersuit against Twitter to include explosive claims from a former employee, but legal experts say the whistleblower’s testimony on Tuesday might have been more of a win for Twitter than it was for Musk.
Twitter whistleblower and former security chief Peiter Zatko appeared before Congress for a two-and-a-half hour testimony regarding an 84-page complaint he filed earlier this year. In the complaint, he accused Twitter of “lying” to Musk about spam accounts on its site, and claimed it has poor security practices that could violate a previous settlement with the Federal Trade Commission.
But several experts said the hearing did little to aid Musk’s argument for getting out of the $44 billion purchase agreement. Musk has said the company intentionally mislead investors as to the number of authentic accounts on its platform.
“It’s certainly not a nail in the coffin for Twitter,” said Jasmine Enberg, an analyst at research firm Insider Intelligence, a unit of Insider’s parent company. “Zatko didn’t really offer any hard evidence that Twitter knowingly misrepresented the number of bots on its platform.”
Ann Lipton, a business law professor at Tulane University Law School, told Insider that Zatko’s testimony might even help Twitter’s case. Multiple experts said Musk’s case would rely on whether his lawyers could prove he would face significant financial consequences because of the whistleblower’s allegations.
But the whole thrust of the hearing in Washington was that there will be no such financial consequences, she said. Lipton said the whistleblower’s testimony seemed to underline that Twitter was prioritizing profit over expensive security measures.
“That may be bad as a matter of social policy — it may even be something Congress will change — but it only affirms Twitter’s legal position that Twitter is very much the entity it represented itself to be,” she said.
A black eye for Twitter, but not a knockout
Still, the whistleblower’s allegations are hardly beneficial to Twitter overall.
“Twitter might be letting out a small sigh of relief, but it’s still not very good news overall,” Enberg said. “No company wants to have their issues broadcast so publicly like that and users already don’t trust these platforms.”
Michael Maimone — a partner at Barnes & Thornburg who has represented clients in Delaware’s Chancery Court — told Insider that he sees Musk’s only successful argument as attempting to prove Twitter would have concealed the whistleblower’s information from Musk, even if he had not waived due diligence. The team would also have to prove the information would negatively affect the value of the company.
“This will be a ‘difficult road for Musk to travel,’ but it is ‘his only road.’ Arguably without the whistleblower, Musk had ‘no road,'” Maimone said.
Though, the expert noted the judge overseeing the case in the Delaware court has already pushed back against Musk’s lawyers’ attempts to argue a similar point.
“We don’t know what would have happened in diligence because there wasn’t any due diligence, right?” Judge Kathaleen St. J. McCormick said last week when Musk’s legal team argued Twitter would have hidden data around the number of authentic accounts on its platform even if Musk had not waived due diligence.
Another avenue for Musk’s team could be if the FTC imposes a fine or revisits its 2011 settlement with Twitter. But, Zatko appeared to have no firsthand knowledge of FTC compliance issues in his testimony, experts said.
“The FTC hasn’t fined Twitter and hasn’t even said that it intends to fine the company,” said Erik Gordon, a professor at the University of Michigan’s Ross Business School. “Mere speculation about a fine or an opinion that the FTC should levy a fine doesn’t constitute a material adverse effect.”
Meanwhile, Chris Pierson, the CEO of cybersecurity firm BlackCloak, told Insider the whistleblower’s allegations indicate Twitter might have a “weakness,” but it’s nothing the company couldn’t come back from.
“There is no ‘end state’ to cybersecurity — it is always evolving and getting better,” he said.
Zatko has been subpoenaed for the $44 billion court battle between Musk and Twitter. The case is set for a five-day trial in October.
Clara Hastings
Ivy Caldwell
