A follower wrote to Musk that under the SEC Rule 10b-5, Twitter “can be liable for omissions of or misleading material facts.”
New Delhi: If Tesla CEO Elon Musk`s legal team can prove that Twitter has misled its users from revealing the actual number of bots or spam accounts on its platform, than the Parag Agrawal-led company can be held liable for fraudulent disclosure in its filing with the US Securities and Exchange Commission (SEC). And Musk thinks so. In a tweet to Musk, a follower wrote to Musk that under the SEC Rule 10b-5, Twitter “can be liable for omissions of or misleading material facts. Waiving due diligence does not mean you have to accept a fraudulent disclosure (understated bots)”.
Musk replied: “Exactly”. To establish a claim under Rule 10b-5, plaintiffs (including the SEC) must show manipulation or deception (through misrepresentation and/or omission), among other rules.
The Tesla CEO has terminated the $44 Twitter takeover deal because he did not believe what Agrawal told him about the actual number of bots on the platform. When Musk threatened to scrap the $44 billion Twitter acquisition deal, the micro-blogging platform revealed that it is suspending more than 1 million spam accounts a day.
The one million figure includes accounts that are weeded out as they attempt to join the platform and therefore are never counted as daily users.
The new figure represented a doubling of its previous update.
Agrawal had said in May that spam account suspensions were running at 500,000 a day.
Twitter has stated consistently in its quarterly results since 2014 that it estimates its spam account problem to represent less than 5 per cent of its daily active users, a figure Musk never believed.
The microblogging platform has just under 230 million daily active users.
The Musk-Twitter battle has now reached the court, with a US court ordering the trial to begin in October.
The trial will run for five days — longer than Twitter asked for but shorter than Musk did. The exact dates have not yet been scheduled. A recent report said that Musk plans to file a counter lawsuit against a microblogging site to scrap the deal.