According to documents disclosed by Elon Musk’s lawyers, and reported in the New York Times, Twitter reached a $7 million settlement with its former head of security, Peiter “Mudge” Zatko, over his July Whistleblower complaint against the company.
On August 24, Law Street Media reported that Zaltko filed a whistleblower complaint against Twitter Inc. over its handling of spam accounts and user security. The suit accused Twitter of hiding information from or misleading shareholders and Elon Musk during his prospective deal to purchase Twitter for $44 billion. Further, the complaint alleged that the company disregarded Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) rules.
The settlement was disclosed during a hearing on Tuesday which was part of Twitter’s lawsuit to prevent Elon Musk from backing out of a $44 billion deal to buy Twitter. Musk’s lawyers offered the settlement as evidence that Twitter had misrepresented its security practices during the prospective deal thus providing Musk an avenue to back out.
On Wednesday, the judge ruled that Musk could use the security problems raised by Zatko in his upcoming trial in the Delaware Court of Chancery in October. The whistleblower claim and the recently released settlement provide Musk with a potential opportunity to back out of the deal by arguing that the security concerns are a material misrepresentation.
Zatko is represented by Whistleblower Aid in his complaint and Musk’s lead counsel in his suit with Twitter is Alex Spiro of Quinn Emanuel Urquhart & Sullivan, LLP.
