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Musk Says Twitter Committed Fraud in Dispute Over Fake Accounts

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Twitter has accused Elon Musk, in a lawsuit, of abandoning his planned acquisition of the company because stock market turbulence made the deal more difficult for him. But firing back in a legal filing, Mr. Musk says it was Twitter that torpedoed the $44 billion acquisition.

Mr. Musk argues that Twitter concealed the true number of inauthentic accounts on its platform, accusing the company of fraud. Such accounts made up at least 10 percent of Twitter’s daily active users who see ads, Mr. Musk’s legal team asserted, reiterating worries that he expressed shortly after signing the deal in April. Twitter has maintained that the figure is less than 5 percent.

Twitter also hid the number of its users who see ads, lawyers for Mr. Musk said in the filing, which was made public on Thursday. During the first quarter of the year, 65 million of the company’s 229 million daily active users did not see ads, according to the filing.

Twitter said that Mr. Musk was trying “to distort data received from Twitter to sponsor wild conclusions” and that its figures were accurate.

Using Botometer, a tool designed by Indiana University to measure inauthentic accounts, analysts for Mr. Musk found higher numbers of inauthentic accounts than Twitter had disclosed, according to the filing. Their analysis was preliminary and will be expanded, the filing said.

The misrepresentations hid weaknesses in Twitter’s business model and tricked Mr. Musk into agreeing to buy Twitter at “an inflated price,” lawyers for the Tesla executive said.

“Twitter was miscounting the number of false and spam accounts on its platform, as part of its scheme to mislead investors about the company’s prospects,” lawyers for Mr. Musk wrote. “Twitter’s disclosures have slowly unraveled, with Twitter frantically closing the gates on information in a desperate bid to prevent the Musk parties from uncovering its fraud.”

The filing, made last Friday but kept confidential until Thursday, was Mr. Musk’s first extensive response in what is expected to be a prolonged legal battle between the social media company and one of the richest people in the world. A trial is set for October.

“His claims are factually inaccurate, legally insufficient and commercially irrelevant,” Bret Taylor, the chairman of Twitter’s board, said in a statement on Thursday. The company also responded to Mr. Musk’s claims in a legal filing.

The Botometer tool is unreliable, Twitter said in its filing. The company noted that the tool used different standards from Twitter’s internal calculations and had once deemed Mr. Musk’s Twitter account “highly likely to be a bot.”

Mr. Musk began snapping up shares of Twitter early this year and by April had become the company’s largest shareholder. He rejected Twitter’s offer to join its board, instead launching a swift and aggressive takeover attempt. But once Twitter agreed to the acquisition, Mr. Musk began to express doubts. In July, he indicated that he no longer wanted to buy the company.

Twitter sued Mr. Musk in Delaware Chancery Court in an attempt to force the acquisition through. Twitter has claimed he lost interest in the deal as the market slumped and shares in Twitter and the electric carmaker Tesla, which is the primary source of Mr. Musk’s wealth, declined.

“Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests,” Twitter said in its lawsuit.

Over the last few days, the company peppered Mr. Musk’s banks, financial partners and associates with subpoenas, demanding communications about the deal that could shed light on why Mr. Musk decided to walk away.

The deal includes a “specific performance” clause that allows Twitter to sue to force the deal through so long as the debt that the billionaire has corralled for the acquisition is in place. But Mr. Musk may pay a $1 billion fee to exit the deal if his funding falls through.

Mr. Musk has maintained that Twitter is flooded with fake accounts and that the company has misled him about the true number of impostors on its platform. Fake accounts are used to spread spam or manipulate Twitter’s service by falsely amplifying trends, and are often automated rather than run by real people.

Twitter earns the bulk of its revenue from advertising. But Mr. Musk asserted that advertisers would not reach the customers they intended if Twitter was flooded with fake accounts. His lawyers argued that inaccuracies in Twitter’s user metrics amounted to a material adverse affect on the business, allowing him to abandon the acquisition.

Twitter said in a message to employees that was seen by The New York Times that it had chosen not to redact any of Mr. Musk’s claims because it was confident in its metrics. “We offer our customers a highly sophisticated set of tools and features to run and measure the effectiveness of their campaigns across our platform, with a foundation of transparency,” said Sean Edgett, Twitter’s general counsel.

On Thursday, Mr. Musk continued to weigh in on how Twitter could change. “I do understand the product quite well, so I think I’ve got a good sense of where to point the engineering team at Twitter to make it radically better,” he said during a meeting of Tesla shareholders.

Mike Isaac and Jack Ewing contributed reporting.

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Tuesday’s top tech news: Elon squares off against Apple

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Oh Elon. It was pretty obvious something was up when Twitter’s new CEO tweeted out of the blue that “Apple has mostly stopped advertising on Twitter,” and asked whether “they hate free speech in America?” Following a question from my colleague Jake Kastrenakes, Musk confirmed that the iPhone maker was threatening Twitter’s presence in the App Store and/or making moderation demands. Welcome to hell, Elon.

Away from the chaos at Twitter there was more bad news in the crypto sector with the news that finance firm BlockFi has filed for bankruptcy amidst the continued FTX fallout, while crypto exchange Kraken has agreed to pay hundreds of millions of dollars in fines over possible Iran sanction violations. Thank god we’ve got another trailer for The Super Mario Bros. Movie to look forward to later today.

For now, here’s a silly tweet:

Stay tuned, as we continue to update this list with the most important news of today: Tuesday, November 29th, 2022.



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‘No Cooperation’: How Sam Bankman-Fried Tried to Cling to FTX

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“Sam this is an excellent pick and I wholeheartedly hope you sign this tonight,” Mr. Dexter wrote in an email on the evening of Nov. 10. “The faster John is in place, the faster the company can resolve issues that require urgent progress.”

A flurry of emails followed. In a message at 3:38 a.m. on Nov. 11, Mr. Miller asked for an update on Mr. Bankman-Fried’s decision. “I am chatting with Sam,” responded Ken Ziman, a lawyer at the firm Paul Weiss who was representing Mr. Bankman-Fried.

Ten minutes later, Mr. Ziman confirmed that Mr. Bankman-Fried had signed the document, authorizing Mr. Ray to take over FTX. The company filed for bankruptcy a few hours later.

The filing was hardly the end of the chaos. The court submission listed more than 130 corporate entities tied to FTX, including its U.S. arm and Alameda, the hedge fund. But the filing was inaccurate: Some of the entities were not owned by the exchange. They belonged to AZA Finance, a separate company that had recently become partners with FTX to promote crypto in Africa.

FTX later acknowledged the error. But in a Nov. 11 Slack message to Mr. Miller and other officials, Elizabeth Rossiello, the chief executive of AZA Finance, called the mistakes in the bankruptcy filing “a storm of wild irresponsibility.”

“This is hurting 9 years of work we have done to create this platform!!” she wrote.

Mr. Miller responded defensively. “We had no cooperation of the founders in preparing this week,” he said. “It was unfortunate.”

Mr. Bankman-Fried was also frustrated. Despite giving up control of FTX, he continued contacting possible investors about new funding for the exchange. In a letter to former colleagues last week, he said he regretted filing for bankruptcy, claiming that “potential interest in billions of dollars of funding came in roughly eight minutes after I signed the Chapter 11 docs.”

He presented no evidence for that claim, and in any case, FTX was no longer his company to run. On the morning of Nov. 11, Mr. Miller moved quickly to make that clear, requesting the deletion of information about the firm’s old leadership from its website.



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The best Cyber Monday deals available now

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Below, we’ve rounded up the best Cyber Monday deals you can currently get, whether you’re in the market for a 4K OLED, a gaming laptop, or another piece of big-ticket tech that would normally require you to shell out your entire paycheck. We’ve included a number of budget-friendly items, too, just in case you’re looking for chargers, a cheap(er) pair of earbuds, or other essential gadgets to round out your arsenal.

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