The SEC asked Twitter for information on the methodology for counting spam/bot accounts, according to documents. The agency was interested in the information that was critical for Elon Musk to confirm the purchase of the platform, but which he never received.
The Securities and Exchange Commission asked Twitter in June to give it more information about how it calculates the percentage of spam/bot accounts on its platform, according to new documents reviewed by CNBC. This is exactly what Elon Musk requested from the platform in order to complete the $44 billion purchase, but never received.
The request for information reportedly came a day after the whistleblower, former Twitter head of security Peiter “Mudge” Zatko, blames the platform for “lying about bots to Elon Musk” in a complaint filed with regulators, including the SEC. Zatko's complaint alleges that Twitter misled regulators from the Federal Trade Commission and the SEC on security issues. He wrote that the true number of bots and spam accounts on Twitter is probably “meaningfully higher” than the figure Twitter claims, and company executives are not at all interested in identifying them.
In a June 15 letter to Twitter CEO Parag Agrawal, the SEC asked the company to disclose its methodology for accounting for spam/bot accounts, to the extent that it is material. The agency also asked for clarification on how Twitter discovered an error in its 2019 mDAU calculations. Twitter disclosed the error this year, saying it had previously inflated the figure.
“Given that the error persisted for three years, please tell us how you concluded there was not a material weakness in your internal control over financial reporting and that your disclosure controls and procedures were effective as of March 31, 2022,” the SEC wrote.
In a letter back, a Twitter lawyer said that thousands of randomly selected accounts from what are considered mDAUs are manually reviewed by employees. They are given a set of rules that define spam or platform manipulation, and an account is flagged as spam or false if it violates any of those rules.
Twitter also said it does not believe there is a material weakness in its internal financial reporting controls as a result of the mDAU overstatement in 2019. The platform said that when users have separate accounts linked together, its system will count all linked accounts as mDAUs, even if only the main account was active during that period. Twitter said the overstatement had no impact on other numbers or its financial statements, and that the overstatement was less than one percent of mDAU for each of the quarters from Q4 2020 to Q4 2021.
On July 27, the SEC wrote to Agrawal that it had completed its review of Twitter documents and reminded him that “the company and its management are responsible for the accuracy and adequacy of their disclosures.”
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.