Twitter refutes Musk’s fraud claim in the fake account dispute

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

Mr. Musk claims that Twitter hid the real number of unauthentic accounts on its platform, accusing the company of fraud. Such accounts made up at least 10% of Twitter’s daily active users who see advertisements, Musk’s legal team said, reiterating concerns expressed shortly after the agreement was signed in April. Twitter said the figure is less than 5%.

Twitter also hid the number of its users seeing advertisements, Musk’s lawyers said in the filing, which was made public Thursday. During the first quarter of the year, 65 million of the company’s 229 million daily active users saw no ads, according to the filing.

Twitter claimed that Mr. Musk was trying to “distort the data he received from Twitter to sponsor wild conclusions” and that his figures were accurate.

Using Botometer, a tool designed by Indiana University to measure inauthentic accounts, Musk analysts found more inauthentic accounts than Twitter revealed, according to the filing. Their analysis was preliminary and will be expanded, the filing says.

The misrepresentations hid weaknesses in Twitter’s business model and led Musk to agree to buy Twitter at “an inflated price,” the Tesla executive’s lawyers said.

“Twitter was miscounting the number of fake and spam accounts on its platform, as part of its scheme to mislead investors about the company’s prospects,” Musk’s lawyers wrote. “The Twitter revelations slowly unfolded, with Twitter frantically closing the gates to information in a desperate attempt to prevent Musk’s parties from uncovering his fraud.”

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

“His claims are factually inaccurate, legally insufficient and commercially irrelevant,” said Bret Taylor, chairman of Twitter’s board of directors 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 than internal Twitter calculations and had once believed that Musk’s Twitter account was “very likely to be a bot.”

Mr. Musk began buying Twitter stock earlier this year and became the company’s largest shareholder by April. He turned down Twitter’s offer to join his advice, instead launching a quick and aggressive takeover attempt. But once Twitter accepted the acquisition, Mr. Musk began to express doubts. In July, he indicated that he no longer wanted to buy the company.

Twitter is suing Mr. Musk in Delaware Chancery Court in an attempt to force the acquisition. Twitter said it lost interest in the deal as the market slumped and shares in Twitter and electric car maker Tesla, which is Musk’s main source of wealth, fell.

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

In recent days, the company has sued Mr. Musk’s banks, financial partners, and associates, asking for communications on the deal that could shed some light on why Mr. Musk decided to leave.

The deal includes a “specific performance” clause that allows Twitter to sue to force the deal as long as the debt the billionaire has accumulated from the acquisition is outstanding. But Mr. Musk could pay a $ 1 billion fee to get out of the deal if his funding fails.

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

Twitter earns most of its revenue from advertising. But Mr. Musk said advertisers wouldn’t reach their desired customers if Twitter was flooded with fake accounts. His lawyers said inaccuracies in Twitter user metrics represented a material negative effect 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 chose not to obscure any of Musk’s claims because he was confident in his metrics. “We offer our clients a highly sophisticated set of tools and features to run and measure the effectiveness of their campaigns on our platform, with a foundation of transparency,” said Sean Edgett, Twitter’s legal advisor.

On Thursday, Mr. Musk continued to consider how Twitter might change. “I understand the product pretty well, so I think I have a good idea of ​​where to direct Twitter’s engineering team to make it radically better,” he said at a Tesla shareholder meeting.

Mike Isacco Other Jack Ewing contributed to the report.