Twitter rejects Musk’s fraud claim in fake account dispute

Twitter has accused Elon Musk, in a lawsuit, of abandoning his planned takeover of the company because the stock market turmoil made the deal more difficult for him. But Musk says it was Twitter that torpedoed the $44 billion acquisition.

Mr. Musk argues that Twitter hid the true number of fake accounts on its platform, accusing the company of fraud. Musk’s legal team confirmed that such accounts made up at least 10 percent of daily active users on Twitter who view ads, echoing his concerns he expressed shortly after the deal was signed in April. Twitter confirmed that the number is less than 5 percent.

Mr Musk’s lawyers said in the filing published Thursday that Twitter has also hidden the number of its users who have seen ads. During the first quarter of the year, 65 million of the company’s 229 million daily active users did not see, according to the filing.

Twitter said Mr Musk was trying to “distort data from Twitter to nurture wild conclusions” and that its numbers were accurate.

Using the Botometer, a tool designed by Indiana University to measure non-genuine accounts, Musk’s analysts found more non-genuine accounts than Twitter disclosed, according to the report. The file said their analysis was preliminary and will be expanded.

Lawyers for the Tesla CEO said the misrepresentations hid weaknesses in Twitter’s business model and tricked Mr Musk into agreeing to buy Twitter “at an inflated price”.

Mr Musk’s lawyers wrote: “Twitter miscalculated the number of fake accounts and spam on its platform, as part of its scheme to mislead investors about the company’s prospects.” “Twitter’s disclosures have slowly unraveled, with Twitter frantically closing gates to information in a desperate attempt to prevent Musk’s parties from exposing its fraud.”

The filing, filed last Friday but kept secret until Thursday, was Musk’s first intense response in what is expected to be a protracted legal battle between the social media company and one of the world’s richest people. The trial date has been set for October.

“His claims are factually inaccurate, legally insufficient and commercially irrelevant,” Twitter CEO Brett Taylor said in a statement Thursday. The company also responded to Mr. Musk’s allegations in a legal file.

Twitter said in its profile that the Botometer tool is unreliable. The company noted that the tool used various parameters from internal Twitter accounts and once considered Mr Musk’s Twitter account to be “highly likely to be a bot”.

Mr. Musk began snapping up Twitter shares early this year and by April had become the company’s largest shareholder. He rejected Twitter’s offer to join its board of directors, and instead launched a swift and daring takeover bid. But once Twitter agreed to the takeover, Mr. Musk began expressing his skepticism. In July, he indicated that he no longer wanted to buy the company.

Twitter has sued Musk in Delaware Chancery Court in an attempt to force the takeover. Twitter claimed it lost interest in the deal as the market slumped and shares in Twitter and electric car maker Tesla, the main source of Mr Musk’s fortune, plummeted.

“Musk is refusing to honor his obligations to Twitter and its shareholders because the deal he signed is no longer in his personal interests,” Twitter said in its lawsuit.

Over the past few days, the company has shown Mr. Musk’s banks, financial partners and associates the subpoenas, requesting communications about the transaction that could shed light on why Mr. Musk decided to withdraw.

The deal includes a “limited performance” clause that allows Twitter to sue to enforce the deal as long as the debt the billionaire agreed to for the takeover exists. But Mr. Musk could pay a $1 billion fee to exit the deal if his funding fails.

Mr. Musk asserted that Twitter is riddled with fake accounts and that the company had misled him about the true number of scammers on its platform. Fake accounts are used to spread spam or manipulate the Twitter service by wrongly inflating trends, and are often automated rather than powered by real people.

Twitter earns the bulk of its revenue from advertising. But Mr. Musk emphasized that advertisers would not reach their intended customers if Twitter was flooded with fake accounts. His lawyers argued that the inaccuracy in Twitter’s user metrics amounted to a material negative impact on the business, allowing him to forgo the acquisition.

Twitter said in a letter to employees seen by The New York Times that it chose not to revise any of Mr. Musk’s claims because it was confident of its standards. “We provide our customers with a highly advanced set of tools and features to run and measure the effectiveness of their campaigns across our platform, with a foundation of transparency,” said Shaun Edgett, Twitter’s general counsel.

On Thursday, Mr. Musk continued to think about how to change Twitter. “I understand the product very well, so I think I have a good idea of ​​where the engineering team should be directed to Twitter to make it fundamentally better,” he said during a meeting of Tesla shareholders.

Mike Isaac And the Jack Ewing Contribute to the preparation of reports.

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