Elon Musk Cites Twitter Whistleblower Claim as Reason to Back Out of Deal

Elon Musk reckons that testimony from a Twitter whistleblower gives him a fresh justification for terminating his $44 billion deal to buy Twitter. Peiter "Mudge" Zatko, a former Twitter security chief, earlier this month alleged that the microblogging site deceiving the public, federal regulators and the company's board of directors about serious security vulnerabilities.

The Tesla CEO's legal team cited Zatko's claim as a reason to terminate the deal in a letter to the US Securities and Exchange Commission, saying Twitter withheld information from Musk in the merger agreement.

Musk agreed to buy Twitter for $44 billion in April, but said he was pulling out in July. At the time, he said Twitter breached multiple parts of the agreement by failing to provide more information about the number of fake accounts on its site, as well as other data. Twitter responded by saying it still plans to close the deal by suing the billionaire.

In its own letter to the SEC, Twitter's lawyers denied Musk's latest allegation.

"It is based solely on statements made by a third party that, as Twitter has previously stated, are riddled with inconsistencies and inaccuracies and lack important context," they wrote.

The company intends to "close the transaction on the price and terms agreed upon" with Musk, the legal team noted.

Twitter and Musk will go on trial on Oct. 17 in Delaware if they don't reach a settlement. Musk's lawyers have subpoenaed Zatko, and the whistleblower's legal team confirmed that he'll comply in an email to CNET on Tuesday.

"He did not make his whistleblower disclosures to the appropriate governmental bodies to benefit Musk or to harm Twitter, but rather to protect the American public and Twitter shareholders," the lawyers wrote.

Killing the deal could cost Musk $1 billion because of a termination fee linked to the agreement, according to an April SEC filing.