Elon Musk files another notice to scrap Twitter acquisition after whistleblower claims

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In this illustration, Elon Musk’s Twitter account is displayed on the screen of a mobile phone with the Twitter logo in the background. A whistleblower’s complaint that Twitter misled federal regulators about the company’s security risks could provide Elon Musk with fresh ammunition in his bid to get out of buying the company for $44 billion.

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Elon Musk’s legal team filed another notice on Tuesday to terminate his $44 billion deal to buy Twitter, citing additional reasons.

Twitter shares were down more than 1% in pre-market trade.

The latest filings come after Twitter’s former head of security Peiter “Mudge” Zatko alleged earlier this month “extreme, egregious deficiencies” by the social media firm related to privacy, security and content moderation.

On July 8, Musk’s legal team initially filed a notice to the U.S. Securities and Exchange Commission (SEC) to terminate the Twitter acquisition. Musk’s legal team alleged that “Twitter has not complied with its contractual obligations.”

The follow up notice, disclosed on Tuesday to the SEC, cites allegations made by Zatko as additional reasons to terminate the deal.

“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,” Mike Ringler, Musk’s legal representative from Skadden, Arps, Slate, Meagher & Flom LLP wrote in a letter to Twitter’s legal chief.

Ringler said in the letter that the latest termination notice is “not legally necessary ” to end the merger deal, but is being delivered in case the July 8 filing is “determined to be invalid for any reason.”

The letter on behalf of Musk said the Zatko complaint “alleges far-reaching misconduct at Twitter—all of which was disclosed to Twitter’s directors and senior executives, including (CEO) Parag Agrawal—that is likely to have severe consequences for Twitter’s business.”

Musk’s lawyer said Zatko alleges that Twitter is in “material noncompliance” with its obligations under its 2011 agreement with the Federal Trade Commission. The letter laid out some of Zatko’s other allegations including claims that Twitter is “uniquely vulnerable to systemic disruption resulting from data center failures or malicious actors,” something senior management knew about but “ignored and sought to obfuscate.”

“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,” the letter said.

Twitter and Elon Musk will go on trial on Oct. 17 in Delaware to resolve Musk’s attempt to cancel his acquisition of the company unless they reach a settlement first.

CNBC’s Lora Kolodny contributed to this report.

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