Twitter is a mess — but in the Elon Musk trial, it might not matter

Illustration by Kristen Radtke / The Verge; Getty Images

There isn't always a "good" side in a fight between rich tech guys who like to move fast. On Tuesday, Peiter "Mudge" Zatko, the former security head of the company, accused the company of hiding a lot of risky behavior and put himself in the middle of the legal fight with Musk. Is the report bad for Twitter in the courtroom?

It is the best answer I have found so far. With a healthy dose of known unknown, the company's odds are more "impaired" than "physically destroyed".

With the caveat that Musk could have some kind of unrevealed, damning evidence, we describe Musk's case as very weak. He has a much more dangerous weapon. Zatko is a well known white hat hacker. Most of Mudge's claims seem to be plausible, even though the report was called a false narrative.

The Securities and Exchange Commission, the Federal Trade Commission, and the Department of Justice were all involved in the report. The Washington Post and CNN got a redacted version of Congress's report. You can read the redacted report online, including some of the not-for-public-consumption quotes that the executives are known for.

This week in the area.

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There could be legal ramifications for the social networking site. Lawmakers confirmed that they are investigating Zatko's claims, and the report claims that the FTC may be able to bring more complaints against the company. The FTC fines are likely to be more of an annoyance than a threat. The Congress is likely to initiate a tradition of politicians yelling at executives of social media.

The trial of Musk and his company will start in October. Zatko has a claim that is relevant to Musk. A pattern of false or misleading statements to regulators, the public, and Musk himself was part of the reason why the leadership lied about the number of bot accounts. According to the report,Agrawal knows that executives on the platform are not incentivized to detect or report bot activity on the platform. The executive leadership team had a high level of ignorantness.

Zatko denied releasing details to Musk, but it’s plausible Musk knew something before this week

While I have seen vague speculation that he is colluding with Musk, Zatko has denied releasing details to anyone. Musk's trial is an extraordinary opportunity to let the world know that he has a problem with the social media site. According to The Washington Post, Musk had lined up a deposition with Zatko before the report was released. It seems like Musk might have known something before, perhaps through a Silicon Valley contact or via Congress.

The strongest evidence Musk has right now is Zatko's claims.

There is a high bar for backing out based on newly discovered information. There are a number of risks and blunders outlined in Zatko's report. Musk could say that when he agreed to the acquisition, he was relying on the reports that had been filed by the company. His case would be strengthened if that information was hidden.

It would bolster it enough to win. Observers think there's a chance.

Chester Spatt, a professor of finance at the Tepper School of Business and former chief economist at the SEC, was the first to react. There's more to the story than that. He could argue that he was relying on the company's disclosures. The whistle blower is calling into question some of his interactions with the senior executives and at the same time he is questioning the company's disclosures.

A law professor at a university agrees with this view. There is a full thread on the report on the social networking site. Even though Zatko isn't quite calling them bald-faced lies, Lipton is unconvinced. He says that the calculation of its user numbers is self-serving. She agrees that the disclosure issue is a potential problem and will probably add to the case.

He admits that themonetizable daily active user figures are accurate, but he doesn't think they should be used as a proxy for real users. His other allegations could pose a problem for the micro-messaging service. If they are bad enough to threaten the company's long-term financial health, there is a chance they will violate the contract and allow Musk to leave.

It's hard for Musk to break these deals. Musk made the bar higher by waiving the due diligence that might have uncovered operational issues. In 2001 Tyson Foods was forced to acquire IBP after the courts forced through mergers when serious financial problems were discovered.

Yair Listokin is a professor at Yale Law School. He sees a strong similarity between the two cases. The contract makes it difficult for this type of argument to succeed. Even if Musk's chances are better now, the case is still not a slam dunk.

We've mostly heard Zatko's side of the story. A lot of the report's claims are plausible, but a lot of the details are blacked out. The Post said that Zatko provided limited hard documentary evidence in his complaint. The possibility of legal action against Zatko is strongly implied by the assertion that the company will "pursue all paths to defend our integrity as a company and set the record straight".

Musk has more power before the trial. He is in a better position to negotiate a lower price for the service. The billionaire's case seems to have been upgraded from "shamelessly bad" to "dicey."

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