Elon Musk seeks to delay Twitter trial in light of whistleblower claim

CNN

By Clare Duffy, CNN Business

Elon Musk’s legal team is seeking to delay the trial with Twitter over their $44 billion acquisition deal by a month in light of the whistleblower disclosure alleging that the company has serious security vulnerabilities.

The case is currently set to go to trial in the Delaware Chancery Court for five days starting October 17, after a judge ruled that the uncertainty from a dragged-out litigation process threatened “irreparable harm” to Twitter.

But in a Monday court filing, Musk’s team proposed a new schedule with the trial taking place sometime in November, depending on the court’s availability. Included in the exhibits attached to the motion, one of which was sealed, was a copy of former Twitter head of security and whistleblower Peiter “Mudge” Zatko’s disclosure, which was first reported by CNN and the Washington Post last week.

Musk’s team has also asked the court for the opportunity to update their counterclaims and response to Twitter’s initial complaint, which accuses the billionaire of breaching the agreement and asks a court to compel him to follow through with the deal.

A Twitter spokesperson said in a statement to CNN Business that the company remains “committed to closing the transaction on the price and terms agreed upon with Mr. Musk. We have not breached any of our representations or obligations under the Agreement, and have not suffered and are not likely to suffer a Company Material Adverse Effect.”

The motion to push back the trial comes after Musk on Monday sent a letter to Twitter citing Zatko’s disclosure as additional justification for terminating the acquisition. The letter claims that if the allegations are true, Twitter breached its side of the deal.

In their earlier move to scrap the deal, Musk and his team accused the company of violating the agreement by lying about the number of bots on its platform and failing to turn over information Musk says he needs to evaluate the issue.

Zatko’s disclosure alleges, in addition to the company’s purported security flaws, that Twitter is in violation of its 2011 consent order with the Federal Trade Commission; that it has violated intellectual property rights; that it lacks incentives to properly measure spam and false accounts on the platform; and that executives have misled the board and regulators. Twitter has criticized Zatko and broadly pushed back against his claims.

In response to Musk, Twitter sent its own letter on Tuesday rejecting his latest attempt to scrap the deal, calling it “invalid and wrongful.” Musk’s letter, Twitter wrote, “is based solely on statements made by a third party that, as Twitter has previously stated, are riddled with inconsistencies and inaccuracies and lack important context.”

The motion to delay is the latest sign of the impact the whistleblower disclosure on the legal battle. Zatko has also been subpoenaed by Musk’s legal team and is expected to appear for a deposition on Sept. 9.

“Mr. Zatko will comply with his legal obligations of that subpoena and his appearance at the deposition is involuntary,” Zatko’s attorneys, Debra Katz and Alexis Ronickher, said in a statement Monday. “He did not make his whistleblower disclosures to the appropriate governmental bodies to benefit Musk or to harm Twitter, but rather to protect the American public and Twitter shareholders.”

Musk lawyer Alex Spiro told CNN last week that they had subpoenaed Zatko in the case even before his whistleblower complaint was made public. In a court hearing in the case last Wednesday, Spiro mentioned Zatko multiple times. Spiro suggested during the hearing that the billionaire’s team does not trust Twitter’s estimate for spam accounts and monetizable daily active users (mDAU), a key metric it provides to investors, and said Musk’s team is requesting information that would allow them to test the measurements.

Zatko is also expected to testify at a Senate hearing on September 13.

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