Twitter whistleblower throws a (new) wrench into Elon Musk deal
It’s been a bit too long since we checked in on the Elon Musk-Twitter deal. Now feels like a great time.
Yesterday, CNN and the Washington Post published a bombshell whistleblower disclosure that Peiter “Mudge” Zatko, Twitter’s former head of security, had sent to Congress and federal agencies last month. The complaint alleged significant security problems that threatened both users’ personal information and also national security. The whistleblower also alleged that top executives at Twitter had been attempting to cover up the company’s vulnerabilities and alleged that at least one employee might be working for a foreign intelligence service.
Here’s what Twitter says about the matter: “Mr. Zatko was fired from his senior executive role at Twitter in January 2022 for ineffective leadership and poor performance,” a Twitter spokesperson told CNN. “What we’ve seen so far is a false narrative about Twitter and our privacy and data security practices that is riddled with inconsistencies and inaccuracies and lacks important context. Mr. Zatko’s allegations and opportunistic timing appear designed to capture attention and inflict harm on Twitter, its customers and its shareholders. Security and privacy have long been company-wide priorities at Twitter and will continue to be.” (Twitter CEO Parag Agrawal also reportedly issued an internal memo to employees yesterday that said the allegations were ‘frustrating and confusing to read’ and said Twitter planned to challenge them.)
Amid the trove of allegations is a claim from Zatko that Twitter’s executives don’t know the number of bots on the platform, and don’t have the motivation or resources to find out. Elon Musk has repeatedly credited fake accounts as a main reason he pulled out of the $44 billion-acquisition of the social media company, though he never produced much evidence as proof. Now, Zatko’s whistleblower disclosure, which is approximately 200 pages, has suddenly added a new twist.
In the disclosure, Zatko claims that Twitter’s metric for tallying bots hides the true figure and alleges that executives are incentivized by bonuses of up to $10 million to obscure the numbers.
Not to mention—the rest of the whistleblower disclosure could likely become useful fodder for Musk in his ongoing attempt to defend backing out of the deal. Since the disclosure became public, Musk’s attorney has reportedly issued a subpoena to Zatko, according to CNN. (It’s worth pointing out that Zatko’s lawyer says Zatko has not communicated with Musk and that he began the whistleblower process before “there was any indication of Musk’s involvement with Twitter,” according to CNN.)
All of this is likely bad news for Twitter, which has sued Musk to force him to complete the deal and has asserted that the billionaire got cold feet during the market downturn.
Checking in… As you may recall, I published a collection of comments from Term Sheet readers on how you were thinking about the downturn. Three months later, I’m curious if anything has changed. Has there been a permanent shift in the private markets? Are we better off? How bad could things get? What’s the upside? Whether you’re a startup founder, a venture capitalist, a private equity investor, a banker, a limited partner, or simply someone who likes to read this newsletter, I’d like to hear from you. Send your thoughts to my email below, and thanks for sharing the wisdom.
See you tomorrow,
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Jackson Fordyce curated the deals section of today’s newsletter.
Correction, August 24, 2022: A previous version of this article misspelled Christian Angermayer’s name.
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- Carbon Direct, a New York-based carbon management firm, raised $60 million in funding co-led by Decarbonization Partners and Quantum Energy Partners.
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- ArabyAds, a Dubai-based advertising company, raised $30 million in pre-Series B funding from AfricInvest.
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- CurbWaste, a New York-based waste management software, raised $6 million in funding. B Capital Ascent Fund led the round and was joined by Mucker Capital.
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- Deposits, a Dallas-based fintech platform, raised $5 million in seed funding. ATX Venture Partners led the round and was joined by investors including Lightspeed Ventures, Cabal Fund, and others.
- Pace, a New York-based revenue platform, raised $5 million in seed funding. Work-Bench led the round and was joined by investors including AlleyCorp and other angels.
- Vestaboard, a San Francisco-based messaging display company, raised $5 million in a seed funding extension round led by its customers.
- Quivr, a Los Angeles-based decentralized social platform, raised $3.55 million in seed funding. Infinity Ventures Crypto led the round and was joined by investors including Tencent co-founder Jason Zeng, C2 Ventures, Sfermion, and FBG Capital.
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- Mantel, a Boston-based carbon capture developer, raised $2 million in seed funding, co-led by The Engine and New Climate Ventures.
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- Betagro, a Bangkok-based meat producer, is planning to raise about $554 million in an initial public offering in Thailand, according to Bloomberg.
- Blueprint Equity, a San Diego-based growth equity firm, hired Connor Nevelle, Duncan McEntyre, and John Bonhard to the investment team. Formerly, Nevelle was with CoverMyMeds, McEntyre was with DealMaker and Five Elms Capital, and Bonhard was with Beringea.
- Costanoa Ventures, a Palo Alto and San Francisco-based venture capital firm, promoted Tony Liu to partner.
- CoVenture, a New York-based asset management firm, hired Dan Bailey as managing director. Formerly, he was with Two Sigma Investments.
- Levine Leichtman Capital Partners, a Beverly Hills-based private equity firm, hired Debra Sherman as director, investor relations and promoted Monty Ismail and Luc Sandmann to director, investment management. Formerly, Sherman was with Ares Management.
- TPG, a Fort Worth, Texas and San Francisco-based alternative asset management firm, hired Peter Munzig as a partner and head of business services for TPG Capital, the firm’s private equity platform. Formerly, he was with General Atlantic.
- Water Street Healthcare Partners, a Chicago-based health care investment firm, hired Deepak Batheja as chief information officer. Formerly, he was with ConcertoCare.
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