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Twitter whistleblower alleges major security issues, Elon Musk subpoenas Jack Dorsey

Yahoo Finance's Alexis Keenan explains the allegations from a Twitter whistleblower on the tech company's security vulnerability and misleading statements, plus the latest from the trial between Elon Musk and Twitter.

Video Transcript

- New whistleblower documents from an ex-Twitter executive allege that major security issues within the company, from user data to shareholder information, was at stake. The whistleblower came forward as Twitter's former head of security, Peiter Zatko. Now for more on this, let's bring in Yahoo Finance's Alexis Keenan. Alexis, a lot to unpack here.

ALEXIS KEENAN: A lot to unpack. OK, this is all coming down this morning. And this is coming from a whistleblower who also happens to be a former head of security for Twitter. Also used to work at, according to one of his online profiles, Google, DARPA.

He filed this document in July. It's a whistleblower complaint filed not only with the SEC, but also with the FTC, as well as the DOJ. And senior Twitter executives, he says, were misleading these federal agencies about the company's capacity for controlling fake accounts, as well as securing user data.

So the Washington report-- Washington Post report that has come out this morning, it comes with a CNN report. Both of these news agencies say they've had a look at this document. And the way that the Washington Post responds to it, they say-- they describe it as an egregious security deficiency, is what this whistleblower, Peiter Zatko, is saying. He's known as Mudge. He's also supposedly a very well-respected hacker. You know, one of those good hackers who goes in and tries to find vulnerable security problems at companies, big companies.

So they say that he lied to federal regulate-- that Twitter is lying to federal regulators, its own board, and also violated a 2011 agreement that the company entered into with the FTC about protecting user data. So some of these claims include facts about the number of platform breaches that it's had. It goes into describing the breaches that we all have known about on Elon Musk's account, on Obama's account, on President Trump's account. Also saying that the company lacks the resource to really know the number of true bots on the platform, and that they're not reliably deleting their user data.

Also saying that just thousands of Twitter employees have access to data. That doesn't allow the company to control these problems. Also saying that half of the company's servers are running outdated security software. So a lot there.

In response, Twitter is saying that Zatko was fired for what they say is ineffective leadership and poor performance. They go on to say, what we've seen so far is a false narrative about Twitter and our privacy and data security practices that is riddled," they say, with inconsistencies and inaccuracies and lacks important context. They also say that Zatko is taking advantage of some opportunistic timing, given the litigation between Twitter and Musk.

- Yeah, I mean, it seems like that definitely plays into that whole narrative, of course, that Elon Musk has put out there that the company has not been fully forthcoming about its spam and its bot problems. So we'll see if he ends up bringing this up. I'm surprised he hasn't tweeted the article yet, but I don't think he has up to this point.

ALEXIS KEENAN: Maybe he's not awake yet.

- Or if he's still-- I don't know, I never know what his patterns are, if he has any. We're also, by the way, speaking of Elon Musk, getting some news that he had former Twitter CEO Jack Dorsey, who also is a friend of his, subpoenaed--

ALEXIS KEENAN: Yes.

- --as part of the whole case.

ALEXIS KEENAN: Yes. Tricky business, right? So this subpoena, it was filed in the Delaware Chancery case yesterday. And what Musk's lawyers are asking for from Dorsey-- not to be surprised, he was the former head of Twitter, so he should be probably getting into this litigation-- they're asking for him to share documents and communications at this point about those fake accounts that are at issue in the case. Those are the monetizable daily active users.

Musk's lawyers want to know about the effects that these spam accounts have on Twitter's business operations. They also want to know about the relationship between those MDAUs and Twitter's revenue projections, both current and past. Also, they want Dorsey to explain any ties between those MDAUs and executive compensation.

Now, that's something also that this whistleblower has brought up, supposedly, reportedly, in this document, this complaint to the FTC and other authorities, saying that executive compensation up to $10 million was an option for Twitter's top brass because, if they were to increase MDAUs, that they had a lot of money on the table. He critiques that, saying that, well, there was no executive compensation, no incentive tied to decreasing fake spam accounts, on the other hand.

So we will be watching for these filings. Don't know if they'll be filed under seal, but certainly I will keep my eye on it. And also, we'll have to take a look at whether the court will be able to consider anything in this whistleblower report. But that might depend, in large part, on how fast these agencies move. They're said to be reviewing it now.

- Wow, this is-- there's so much to unpack here. I have questions about the durability of the Dorsey-Musk friendship, given what-- you know, about Dorsey's legacy, as well, as CEO of Twitter, given what he could possibly say here. I know you're going to continue to be on top of it. Thanks so much, Alexis.

ALEXIS KEENAN: I will.

- Appreciate it.