Texas AG Launches Investigation Into Twitter Over Fake Users

Texas Attorney General Ken Paxton has launched an investigation against “Twitter for potentially deceiving Texas consumers” as well as Texas businesses, over fake bot accounts on the platform.

This comes after Elon Musk’s attorney filed a letter saying that the $44 billion acquirement deal could be on the rocks if Twitter doesn’t reveal the number of fake accounts on the platform.

Paxton released the information about the investigation that Twitter is in violation of the Texas Deceptive Trade Practices Act, saying “Twitter has received intense scrutiny in recent weeks over claiming in its financial regulatory filings that fewer than 5% of all users are bots, when they may in fact comprise as much as 20% or more. The difference could dramatically affect the cost to Texas consumers and businesses who transact with Twitter.

“To address this concern, Attorney General Paxton issued a Civil Investigative Demand (CID) to investigate whether Twitter’s reporting on real versus fake users is ‘false, misleading, or deceptive’ under the Texas Deceptive Trade Practices Act. The CID requires Twitter to turn over documents related to how it calculates and manages its user data and how these numbers relate to Twitter’s advertising businesses. Twitter has until June 27 to respond to Attorney General Paxton’s Demand.”

In a further statement, Paxton said that “Texans rely on Twitter’s public statements that nearly all its users are real people. It matters not only for regular Twitter users, but also Texas businesses and advertisers who use Twitter for their livelihoods. If Twitter is misrepresenting how many accounts are fake to drive up their revenue, I have a duty to protect Texans.”

In the letter to Twitter Chief Legal Officer Vijaya Gadde, Skadden attorney Mike Ringler for Musk said that “Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement,” according to CNBC.

He said further that Twitter must provide the information that is being requested, and that the merger agreement requires it. Ringler disputed Twitter’s claim that they are not responsible to give that data in order to close the deal.

The letter, submitted to the SEC, posited that “If Twitter is confident in its publicized spam estimates, Mr. Musk does not understand the company’s reluctance to allow Mr. Musk to independently evaluate those estimates. As noted in our previous correspondence, Mr. Musk will of course comply with the restrictions provided under Section 6.4, including by ensuring that anyone reviewing the data is bound by a non-disclosure agreement, and Mr. Musk will not retain or otherwise use any competitively sensitive information if the transaction is not consummated.”

Twitter shares were down 5 percent on Monday morning trading.