Twitter faces a proposed class action that alleges the platform and its top execs harmed investors financially by failing to be upfront about “major security problems” first reported by a whistleblower to CNN last month.
The 22-page suit was filed just days after Congress heard testimony from former Twitter security chief Peiter “Mudge” Zatko, who asserted to the Senate Judiciary Committee that the social media giant had misled regulators about the strength of its cybersecurity and attempts to reign in millions of fake accounts.
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The lawsuit alleges investors and entities who bought or otherwise acquired public Twitter securities between August 3, 2020 and August 23, 2022 were financially harmed when the price of the company’s stock fell upon the publication of a CNN article late last month in which Zatko “blew the whistle” on Twitter security issues he said posed a threat to users’ personal information, shareholders, national security and democracy.
Upon the release of the CNN report on August 23, Twitter share prices fell $3.15, or more than seven percent, to close at $39.86, the suit says.
Per the case, the disclosure sent by Zatko to Congress and federal agencies in July “paints a picture of a chaotic and reckless environment at a mismanaged company that allows too many of its staff access to the platform’s central controls and most sensitive information without adequate oversight.” Zatko also alleged that some higher-ups had been “trying to cover up Twitter’s serious vulnerabilities, and that one or more current employees may be working for a foreign intelligence service,” the CNN article stated.
Further, Zatko, who reported directly to Twitter CEO Parag Agrawal, claimed the defendant “does not reliably delete users’ data after they cancel their accounts,” sometimes because Twitter had “lost track of the information,” and that the platform “misled regulators about whether it deletes the data as it is required to do,” per CNN.
The proposed class action contends that statements disseminated by Twitter publicly in the last two years and change were “materially false and/or misleading” in that they misrepresented and failed to disclose the company’s awareness of the security problems plaguing its platform. At the same time, Twitter allegedly failed to relay that it had “actively worked to hide” the aforementioned security concerns from the board, the investing public and regulators, and that contrary to what it said in Securities and Exchange Commission filings, it “did not take steps to improve security,” the suit says.
Investors were also not made aware that Twitter’s alleged active refusal to address the security problems brought to light by Zatko put the company at risk of losing “public goodwill,” the filing adds.
“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common shares, Plaintiff and other Class members have suffered significant losses and damages,” the complaint alleges.
The suit looks to cover all persons and entities who acquired publicly traded Twitter securities between August 3, 2020 and August 23, 2022 and were damaged thereby.
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