JRP3
Hyperactive Member
Not if it turns into a toxic cesspool like 4chan and the majority of people stop using it.
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Elon & Twitter
- Thread starter Buckminster
- Start date
- Status
Daniel in SD
(supervised)
My impression is that Elon thinks that authenticating users will help people filter out malicious actors.
EVNow
Well-Known Member
Authenticate Users = No anonymity = Government authorized content.
People take enormous risk of being found out and jailed/killed when they oppose authoritarian governments, even when they are anonymous.
AlanSubie4Life
Efficiency Obsessed Member
Elon potentially devaluing his own property…
Seems like this is his last best hope if he can somehow show it is material.
Seems like this is his last best hope if he can somehow show it is material.
Knightshade
Well-Known Member
Reasoning I saw suggested that given how terrible his bot argument was as a basis to get out of the deal he's now gonna pivot to this entirely unrelated argument that there was some secret fraud going on to get out of it--- which would require amending his suit which he'd need the judges permission to do- and it'd still be unclear if it'd get him out of anything.
Nice post on it here:
lawprofessors.typepad.com
Nice post on it here:
Business Law Prof Blog: I guess I’m writing about Twitter again
I’ll admit it – I frequently choose blog post topics based on what I can write quickly, and since obviously I’ve been following the Twitter case closely, that’s the topic for today. This post is really meant as an explainer...
lawprofessors.typepad.com
Daniel in SD
(supervised)
Yeah. That seems to be Musk's position. I recall someone explaining this to him and him backing off a bit. Honestly I think we can both agree that he hasn't really thought this whole thing through. Isn't "failing fast" his engineering philosophy? I totally agree with him when it comes to engineering but I'm not so sure it's going to work for running a social network.
EVNow
Well-Known Member
Lots of problems with that argument he makes there.
This whole social network being good for societies / freedom (remember Arab spring ?) has turned into ”Its good to organize genocide” (Myanmar) and spread misinformation more efficiently. The backlash on that led to censoring. Elon’s solution is to “authenticate” - which FB already does (and WhatsApp). Obviously doesn’t work with FB/WhatsApp, how would it with Twitter ? Afterall people who organized genocide and misinformation campaigns are authenticated, well known personalities / groups.
New filing with more suggested violations of merger terms resulting from whistleblower:
https://www.sec.gov/Archives/edgar/data/0001494730/000110465922095765/tm2224790d1_ex99-q.htm
https://www.sec.gov/Archives/edgar/data/0001494730/000110465922095765/tm2224790d1_ex99-q.htm
Knightshade
Well-Known Member
Yup--- as suggested his original arguments were (legally), terrible.... this new stuff that was previously unknown to him (which actually contradicts his original arguments in fact!) is..... at least marginally less terrible-- it's just something that the judge might not allow into the case at this point since it's both coming quite late in the process and also technically outside the terms of the actual agreement (which specified ONLY things IN the agreement to be things upon which Musk was relying to make the deal- and the whistleblower stuff doesn't necessarily contradict anything in there)
Is there no clause in the contract that states that the parties have to work in good faith ?
His new filing calls out multiple terms of the merger agreement that were potentially violated.
Note also the letter is to Twitter regarding termination of the merger, not to the court.
EX-99.Q 2 tm2224790d1_ex99-q.htm EXHIBIT 99.Q Exhibit Q
Skadden, Arps, Slate, Meagher & Flom llp
525 UNIVERSITY AVENUE PALO ALTO, CALIFORNIA 94301
TEL: (650) 470-4500 FAX: (650) 470-4570
www.skadden.com
August 29, 2022
Twitter, Inc.
1355 Market Street, Suite 900
San Francisco, CA 94103
Attn: Vijaya Gadde, Chief Legal Officer
Dear Ms. Gadde:
We write on behalf of X Holdings I, Inc. and X Holdings II, Inc. (the “Musk Parties”) to provide an additional notice of termination of the Agreement and Plan of Merger by and among the Musk Parties and Twitter, Inc. (“Twitter”) dated as of April 25, 2022 (the “Merger Agreement”). On July 8, 2022, the Musk Parties terminated the Merger Agreement (the “July 8 Termination Notice”) on certain bases. Since that time, Twitter has challenged the validity of the July 8 Termination Notice and contends that the Merger Agreement remains in force, a position that the Musk Parties are contesting. Allegations regarding certain facts, known to Twitter prior to and as of July 8, 2022, but undisclosed to the Musk Parties prior to and at that time, have since come to light that provide additional and distinct bases to terminate the Merger Agreement. Although the Musk Parties believe this termination notice is not legally necessary to terminate the Merger Agreement because they have already validly terminated it pursuant to the July 8 Termination Notice, the Musk Parties are delivering this additional termination notice in the event that the July 8 Termination Notice is determined to be invalid for any reason.
On August 23, 2022, the Washington Post published a whistleblower report to Congress, the SEC, FTC, and DOJ filed by Peiter “Mudge” Zatko, Twitter’s former chief security officer, on July 6, 2022 (the “Zatko Complaint”). The Zatko Complaint alleges far-reaching misconduct at Twitter—all of which was disclosed to Twitter’s directors and senior executives, including Parag Agrawal—that is likely to have severe consequences for Twitter’s business. For example, Mr. Zatko alleges that:
· Twitter is in material noncompliance with both its obligations under a 2011 FTC consent decree and its general obligations under data privacy, unfair trade practice, and consumer protection laws and regulations; · Twitter is uniquely vulnerable to systemic disruption resulting from data center failures or malicious actors, a fact which Twitter leadership (including its CEO) have ignored and sought to obfuscate; · Twitter’s platform is built in significant part on the misappropriation and infringement of third party intellectual property; and · Twitter acquiesced to demands made by the Indian government that its agents be hired by Twitter and given access to Twitter user information.
These allegations, if true, demonstrate that Twitter has breached the following provisions of the Merger Agreement, thereby giving the Musk Parties the right to terminate the Merger Agreement pursuant to its terms as more fully described below.
Section 4.5 Permits; Compliance With Laws. In the Merger Agreement, Twitter represented, inter alia, that it was in compliance with all applicable laws. That representation was apparently false when made on the date of the Merger Agreement and as of the date of the July 8 Termination Notice, and continues to be inaccurate. 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. Twitter has already paid a fine of $150 million for violating an aspect of that decree, and Facebook recently paid $5 billion for similar user data violations. In addition, the Zatko Complaint alleges that Twitter has repeatedly violated the 2011 FTC consent decree (by going well beyond the violations settled in Twitter’s recent $150 million settlement), 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. These violations would have material, if not existential, consequences to Twitter’s business, constituting a Company Material Adverse Effect as defined in the Merger Agreement.
Section 4.6 Company SEC Documents; Financial Statements. In the Merger Agreement, Twitter also represented, inter alia, that no documents it filed with the SEC since January 1, 2022, “contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein . . . not misleading.” That representation was apparently false when made on the date of the Merger Agreement and as of the date of the July 8 Termination Notice, and continues to be inaccurate. The Zatko Complaint alleges that Twitter’s SEC filings contained untrue statements of material fact or omitted to state material facts necessary to make the statements therein not misleading. For example, Twitter’s 2021 10-K, dated February 16, 2022, states that “concerns related to . . . privacy, data protection, safety, [and] cybersecurity” “could potentially negatively affect mDAU growth and engagement,” while omitting the significant privacy, data protection, safety, [and] cybersecurity risks Mr. Zatko alerted the board of prior to the filing of the 10-K, including those facts outlined above. Similarly, Twitter’s representation in its 2021 10-K that Twitter “strives to comply with applicable laws and regulations relating to privacy, data protection, and cybersecurity” was materially misleading if, in reality, Twitter was ignoring Mr. Zatko’s warnings that the company was in violation of privacy, data protection, and cybersecurity laws and regulations.
Twitter’s material misrepresentations and/or omissions in the Merger Agreement and Twitter’s 2021 10-K regarding these serious allegations also constitute fraud in the inducement, giving the Musk Parties the right to recission.
Section 4.8 Disclosure Controls and Procedures. In the Merger Agreement, Twitter also represented, inter alia, that it had disclosed “any fraud to the Knowledge of the Company, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.” That representation was apparently false when made on the date of the Merger Agreement and as of the date of the July 8 Termination Notice, and continues to be inaccurate. One component of the Zatko Complaint is that Twitter’s CEO, Parag Agrawal, knowingly presented false and misleading reports to Twitter’s Board of Directors in order to cover up flagrant vulnerabilities in Twitter’s security and data protection infrastructure. Twitter was made aware of precisely that in an internal report prepared by Mr. Zatko in February 2022. Twitter was obligated to disclose Mr. Agrawal’s conduct “whether or not material” (although it was clearly material), and failed to do so.
Section 4.11. Litigation. In the Merger Agreement, Twitter represented, inter alia, that there were no threatened or pending lawsuits or Government investigations that would constitute a Company Material Adverse Effect (within the meaning of the Merger Agreement). It is likely the case—given the extensive information withheld from the Musk Parties detailed in the Zatko Complaint—that the representations set forth in Section 4.11 will be false as of the date of any potential closing of the transactions contemplated by the Merger Agreement, resulting in a failure of the closing condition set forth in Section 7.2(b). Indeed, Twitter is now facing multiple Congressional inquiries: the Senate Judiciary Committee has announced a full Committee hearing, the House Energy and Commerce Committee announced that it is “assessing next steps,” and multiple US Senators have publicly called for the FTC and DOJ to open investigations. See ; . The data privacy authorities of Ireland and France are also investigating the claims in the Zatko Complaint.. It is likely that the SEC, FTC, and DOJ, as well as additional foreign regulators are not far behind. Twitter will also now face a myriad of civil lawsuits, asserting claims pursuant to various privacy and cybersecurity laws, state consumer protection laws, false advertising laws, intellectual property theft and misappropriation and common law claims, such as unjust enrichment, fraud, and breach of contract. Many of these civil claims are likely to be asserted as class action claims that could threaten the viability of the platform. This still-rolling litigation avalanche brings with it billions of dollars of potential damages, fines, and penalties, to say nothing of the significant reputational and operational harm that comes in parallel, clearly constituting a Company Material Adverse Effect under the terms of the Merger Agreement.
Twitter faces scrutiny from EU watchdogs after Mudge report – TechCrunch
Two national data protection authorities in the EU (Ireland and France) have confirmed to TechCrunch they are following up on the Twitter whistleblower complainttechcrunch.com
Section 4.14. Intellectual Property. In the Merger Agreement, Twitter represented, inter alia, that it was not infringing the intellectual property of others (the “Non-Infringement Rep”) and that it was in compliance with all applicable data privacy and protection requirements (the “Data Privacy Rep”). Both representations were apparently false when made on the date of the Merger Agreement and as of the date of the July 8 Termination Notice, and both continue to be inaccurate. As revealed by the Zatko Complaint, Twitter apparently never acquired the rights to Twitter’s core machine learning models, which the Musk Parties understand to be fundamental to the Twitter platform itself. That infringement threatens not just significant monetary damages, but the potential for injunctive relief that would threaten Twitter’s ongoing business as currently operated. Either alone would be a Company Material Adverse Effect under the terms of the Merger Agreement. Similarly, the Zatko Complaint lays out widespread, egregious violations of the data privacy protections that a company like Twitter is expected—and, indeed, legally required—to have in place. This would be a gross violation of trust by the Twitter platform that will have legal and commercial consequences, and which also gives rise to a Company Material Adverse Effect under the terms of the Merger Agreement.
.
Section 7.2. Conditions to the Obligations of Parent and Acquisition Sub. Finally, in the Merger Agreement, Twitter represented, inter alia, that it had not and would not (prior to closing) experience a Company Material Adverse Effect (within the meaning of the Merger Agreement). The breaches and consequences described above, individually and collectively, suggest that Twitter has in fact already experienced a Company Material Adverse Effect under the terms of the Merger Agreement, the full extent of which remains to be seen.
The facts supporting these breaches, which were withheld from the Musk Parties but known to Twitter as of the date of the Merger Agreement and at the time of the July 8 Termination Notice, provided additional bases to terminate the Merger Agreement as of that date and provide additional bases to terminate the Merger Agreement today if the Musk Parties’ termination of the Merger Agreement pursuant to the July 8 Termination Notice is determined to be invalid for any reason. This also provides a basis for recission. Because these facts were known to Twitter and withheld from the Musk Parties, and because Twitter has since taken the position that the Merger Agreement remains in effect, the Musk Parties hereby provide this additional notice of termination of the Merger Agreement effective as of July 8, 2022 pursuant to Section 8.1(d)(i) thereof on the basis of the facts set forth above. For the avoidance of doubt, these bases are in addition to, and not in lieu of, the bases for termination identified in the July 8 Termination Notice.
Sincerely, /s/ Mike Ringler Mike Ringler Skadden, Arps, Slate, Meagher & Flom LLP
cc:
Katherine A. Martin, Wilson Sonsini Goodrich & Rosati, Professional Corporation
Martin W. Korman, Wilson Sonsini Goodrich & Rosati, Professional Corporation
Douglas K. Schnell, Wilson Sonsini Goodrich & Rosati, Professional Corporation
Remi P Korenblit, Wilson Sonsini Goodrich & Rosati, Professional Corporation
Alan Klein, Simpson Thacher & Bartlett LLP
Anthony F. Vernace, Simpson Thacher & Bartlett LLP
Katherine M. Krause, Simpson Thacher & Bartlett LLP
Elon Musk
Alex Spiro, Quinn Emanuel Urquhart & Sullivan, LLP
Andrew Rossman, Quinn Emanuel Urquhart & Sullivan, LLP
Knightshade
Well-Known Member
In good faith to close the deal? Sure.
Not relevant to anything in the whistleblower stuff though.
Now if the whistleblower stuff can prove material fraud in their SEC filings (and this is tricky too, because the agreement specifies ONLY the filing after a certain date- and I think the dude left Twitter around the time of the cut-off date) then there might be something there.... might--- I strongly suggest checking the link I posted maybe 4 or 5 posts ago from a lawyer discussing how the whistleblower stuff may or may not help his case overall.
But the whistleblowers claims also poke huge holes in Musks original basis for wanting to get out of the deal (not that those didn't already suck as reasons)
well yeah, I think they'd HAVE to do that first before asking the Chancery court to amend the suit to include those reasons. (that said- he once again threw a bunch of stuff that is NOT a basis for getting out of the deal into the SEC filing and likely will into the court case)
Daniel in SD
(supervised)
In his counterclaim:
"[Twitter] disobeyed orders from and initiated risky litigation against the Indian government—thereby placing Twitter’s third largest market at risk."
In his new filing with the SEC:
"Twitter acquiesced to demands made by the Indian government that its agents be hired by Twitter and given access to Twitter user information."
My take on Mudge is that he thinks Twitter is a poorly run company, especially from a security standpoint, and whistleblower laws are a good way to alert the public without getting sued.
For people who don't want to read the SEC filing, here are the allegations:
"[Twitter] disobeyed orders from and initiated risky litigation against the Indian government—thereby placing Twitter’s third largest market at risk."
In his new filing with the SEC:
"Twitter acquiesced to demands made by the Indian government that its agents be hired by Twitter and given access to Twitter user information."
My take on Mudge is that he thinks Twitter is a poorly run company, especially from a security standpoint, and whistleblower laws are a good way to alert the public without getting sued.
For people who don't want to read the SEC filing, here are the allegations:
- Twitter is in material noncompliance with both its obligations under a 2011 FTC consent decree and its general obligations under data privacy, unfair trade practice, and consumer protection laws and regulations;
- Twitter is uniquely vulnerable to systemic disruption resulting from data center failures or malicious actors, a fact which Twitter leadership (including its CEO) have ignored and sought to obfuscate;
- Twitter’s platform is built in significant part on the misappropriation and infringement of third party intellectual property; and
- Twitter acquiesced to demands made by the Indian government that its agents be hired by Twitter and given access to Twitter user information.
Daniel in SD
(supervised)
Knightshade
Well-Known Member
Yup- exactly as expected.... as long as he can keep making up new stuff to claim lets him exit the deal he can keep asking for extensions for new discovery.
Remains to be see if the court will allow any of it of course.
Remains to be see if the court will allow any of it of course.
AlanSubie4Life
Efficiency Obsessed Member
I could see her giving him “two weeks.”
EVNow
Well-Known Member
True in a way - though I'd argue this is the right move. Not that it matters much - the judiciary has been more or less compromised in India now. Hardly anyone wins against Modi. They "finish off" judges who might rule against Modi - taking a cue from Putin.
This was obviously bad. Infact this makes Twitter untrustworthy for users all over the world. Not good at all.
If you dig - you will find problems with most companies. Apparently Twitter has more problems than many others ... shouldn't be surprising. We have seen so many issues with Facebook too ...
Knightshade
Well-Known Member
That's exactly the problem Elon has here... "company maybe did some bad stuff" isn't sufficient.
He has to prove they EITHER did:
Bad stuff specifically listed in the contract as bad enough to get out of the deal (or even relevant to the deal specific terms- because the wording of the deal specifically excludes a lot)
or
Massive outright fraud on a colossal enough scale to be an MAE outside the specific terms of the actual merger agreement
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