Published - August 24, 2022 @ 2:55 PM (EET)

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In a whistleblower complaint filed last month with the US Securities and Exchange Commission, former security chief Peiter Zatko said Twitter Inc. (NYSE:TWTR) misled federal regulators about its defenses against hackers and spam accounts. 

The famed hacker, widely known as "Mudge," is claiming severe shortcomings, including Twitter falsely declaring a solid security plan and prioritizing user growth over reducing spam.

In the report made public Tuesday, Zatko alleged that more than half of Twitter's 500,000 servers were running out-of-date software and that more than a quarter of employee computers have disabled software updates that can provide critical security patches.

Raising these major national security concerns, US regulators have vowed to investigate, which will have significant implications for Twitter's business.

Responding to the allegations, Twitter Chief Executive Parag Agrawal said,

"What we have seen so far is a false narrative that is riddled with inconsistencies and inaccuracies, and presented without important context."

NOW WHAT

Musk, chief executive of Tesla Inc., told Twitter in July that he was ending the agreement to buy the company for $54.20 per share after he accused the social media giant of fraudulently misrepresenting the true number of spam and bot accounts on its platform.

According to legal experts, the complaint could potentially boost Elon Musk's efforts to walk away from a $44 billion buyout of the social media platform.  

Though it's not clear if and how Musk's team will use the whistleblower's information, Musk's lawyer, Alex Spiro, with Quinn Emanuel Urquhart & Sullivan, has already subpoenaed Zatko to testify in court.

If regulators were to find Twitter deceived consumers about its security protocols, it could be considered a violation of its 2011 agreement with the FTC.

Commenting on the matter, the founder of industrial cybersecurity company Dragos, Robert Lee, said

"if Mudge is making this type of claim, it deserves the investigation."

Twitter in January, fired Zatko from his position as Head of Security only two years after his appointment to the role. Shares fell 7.3% to close at $39.86 Tuesday.

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