Tesla founder Elon Musk attends Offshore Northern Seas 2022 in Stavanger, Norway August 29, 2022.
NTB/Carina Johansen via REUTERS
Elon Musk’s lawyers issue a third letter trying to terminate his deal to acquire Twitter.
A $7.75 million payment to Peiter “Mudge” Zatko is a new breach of the agreement, Musk claimed.
Zatko is a whistleblower against Twitter. His disclosure openly backs some Musk allegations.
Elon Musk found a new reason to walk away from buying Twitter. This time it’s a huge severance package the company paid to a former executive who recently accused it of serious security flaws.
In a letter sent Friday afternoon by Musk’s legal counsel to Twitter’s chief legal officer Vijaya Gadde, the billionaire took issue with a $7.75 million payment in late June to Peiter Zatko, better known as “Mudge,” after he was let go from the company.
Lawyers for Musk argued the payment is a breach of the $44 billion merger agreement signed back in April. Twitter promised in the deal not to “provide any severance or termination payments or benefits to any Company Service Provider,” the attorneys wrote in the letter, while noting that the definition of a “Company Service Provider” includes former Twitter employees.
This marks the third “notice of termination” of the merger agreement sent by Musk to Twitter. The first was sent in early July, claiming that Musk had the right to cancel the deal because Twitter’s allegedly withheld requested data and information regarding the number of “bots” or spam accounts on the platform. The second was in August, pointing to Zatko’s whistleblower disclosure as a new basis for Musk to call off the acquisition. Broadly speaking, Musk is accusing Twitter of “fraud” by misleading him on its business and monetization capabilities, as well as public investors and the SEC.
“Although the Musk parties believe this termination notice is not legally necessary to terminate the merger agreement because they have already validly terminated it… the Musk parties are delivering this additional termination notice in the event that [earlier notices are] determined to be invalid for any reason,” the letter adds.
Representatives for Twitter could not be immediately reached for comment. The company has repeatedly stood by its existing disclosures about bots on its service.
Musk has leapt on Zatko’s whistleblower disclosure, made public in August, as he fights in Delaware Chancery Court to walk away from his agreement to buy Twitter at no cost. Twitter sued Musk in July, saying he is legally bound to purchase the company for $44 billion and Musk’s true reason for backing out was worry over his personal fortune being affected by a downward turn in financial markets. The company also recently claimed that Musk’s personal texts show he was thinking about getting out of the deal in early May, just a few weeks after he agreed to buy it.
As for Zatko, a hacker turned security expert, he spent only a year working at Twitter. The company claims he was fired earlier this year for performance issues and that all of the concerns he raised about security were investigated when he was still with the company. Zatko’s lengthy disclosure to Congress claimed Twitter suffers from unchecked and “egregious” security flaws that he was told to withhold or temper the seriousness of in presentations to the company’s board. He also claimed Twitter “lied” to Musk about its measuring of “bot” accounts. Twitter called Zatko’s disclosure “opportunistic” and an obvious attempt to harm the company.
While Twitter employees told Insider they are suspicious of Zatko’s motivations, some of his claims struck a chord with current Twitter workers.
Twitter’s lawsuit against Musk is headed to a five-day trial in early October.
Are you a Twitter employee or someone with insight to share? Contact Kali Hays at khays@insider.com, on secure messaging app Signal at 949-280-0267, or through Twitter DM at @hayskali. Reach out using a non-work device.