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Musk tries to stall Twitter takeover trial following whistleblower claims

And throws a copy of Mudge's allegations to the SEC, too, just in case it hasn't read them yet

Elon Musk's lawyers issued a double whammy this week in the ongoing quest by the world's richest man to cancel his own proposed takeover of Twitter.

On Tuesday the billionaire's legal eagles asked a Delaware court to delay [PDF] the forthcoming showdown between him and Twitter. A five-day trial is scheduled to begin mid-October after Twitter sued Musk when he tried to back out of the $44 billion deal.

Musk claimed, among other things, Twitter withheld crucial internal information from him, thus breaking and nullifying the takeover agreement, and Twitter counter-argued it was in fact Musk who is violating the terms by attempting to unilaterally end the sale. Twitter wants him to either complete the transaction as proposed, or cough up the agreed $1 billion break-up fee.

His lawyers have asked for more time to assemble their defense, pushing the trial to sometime after November 10. Specifically, the team want to update their complaint, and include in their filings a copy of Peiter "Mudge" Zatko's whistleblower complaint against Twitter.

Mudge, the microblogging biz's former head of security, has made a range of claims against his ex-employers, which Musk's attorneys want to use as evidence to kill the takeover deal once and for all. The lawyers have, as expected, subpoenaed Mudge.

As an aside, it was reported on Tuesday that Twitter considered providing a service allowing its users to offer OnlyFans-style subscriptions to adult content, but abandoned the idea when it was clear it didn't have sufficient systems in place to protect children from exploitation nor verify people's ages.

Back to the SEC

And it's not just kicking off in Delaware. The Tesla mogul's lawyers have also written to America's financial watchdog, the SEC, again citing Mudge's allegations of security failings and other details as further reasons why he should be allowed to terminate the takeover and walk away scot-free. The SpaceX CEO had previously written to the SEC declaring his reasons why he was quitting the deal.

Musk has claimed Twitter breached the terms of the deal by hiding the true number of spam and fake bot accounts on the social media platform. Twitter countered it has been honest and accurate in its bot reporting. Now Musk is attempting to tear up the acquisition using Mudge's claims.

The now-former Twitter security chief said that, among other things, the company failed to comply with a 2011 FTC consent order regarding security and privacy (which the FTC brought up itself in May); that internal cybersecurity defenses were weak; that too many workers had access to live production data; that Twitter agreed to hire Indian government agents who would have access to this sensitive data; and that some staff even installed spyware on work computers on behalf of foreign intelligence.

This provides "additional bases" to terminate the merger plan, Musk's lawyers opined. Mudge, a highly respected member of the infosec world, is due to testify on this matter before the US Senate Judiciary Committee next month. Twitter's top brass have described his allegations as inaccurate.

"In the merger agreement, Twitter represented that it was in compliance with all applicable laws," Musk's legal team told the SEC.

"The Zatko complaint alleges that Twitter has been violating a consent decree it entered into with the FTC in 2011. That consent decree required Twitter to establish and maintain 'a comprehensive information security plan' to ensure that its users' personal data was sufficiently protected from disclosure.

"Mr Zatko's statements purport to reveal that Twitter has not been, and perhaps never will be, in compliance with that decree. In addition, the Zatko complaint alleges that Twitter has repeatedly violated the 2011 FTC consent decree ... in addition to breaching a slew of other data privacy, unfair trade practice, cybersecurity, and consumer protection laws and regulations that Twitter must comply with, including but not limited to Twitter granting agents of the Indian government access to confidential user data."

If these allegations are true, vital details were withheld from Musk, and Twitter is in breach of the proposed takeover, his lawyers argued, and therefore the deal should be called off. We recall that the billionaire waived due diligence when offering Twitter $54.20 a share to buy it.

Twitter's lawyers hit back with a letter of their own to the SEC. Musk's arguments are invalid and based on a third-party making statements that are inconsistent and wrong, Twitter's lawyers claimed.

"Contrary to the assertions in your letter, Twitter has breached none of its representations or obligations under the agreement ... Twitter intends to enforce the agreement and close the transaction on the price and terms agreed upon with the Musk parties." ®

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