SEC asks Twitter how it counts fake accounts

Detroit: US securities regulators have questioned how Twitter counts fake accounts on its platform.

In June, the U.S. Securities and Exchange Commission questioned the company about how it calculates fake and spam accounts and “basic judgments and assumptions used by management.”

The agency’s corporate finance arm made the request in a letter dated June 15, but Tesla CEO Elon Musk cites the issue as a basis for backing out of the deal to buy Twitter for $44 billion. It was right before

Questions like these can be routine, and it wasn’t clear whether the SEC had launched a formal investigation into the fake Twitter accounts. The SEC did not comment on Wednesday. Twitter did not immediately respond to a request for comment.

Palo Alto, Calif. law firm Wilson Sonsini responded in a June 22 letter that it believed the company adequately disclosed its methodology in its annual report filed in 2021.

According to the letter, Twitter deduces the fake accounts through an internal review of sample accounts. The number of fake accounts “represents the average number of fake or spam accounts in the sample during each monthly analysis period during the quarter,” the letter said.

He added that less than 5% of Twitter’s “Monetizable Daily Active Usage or Users” (mDAU) were fake accounts in the fourth quarter of last year (the period the SEC investigated).

The letter was posted by the SEC a day after Twitter’s former security chief claimed the company had inadequate cybersecurity defenses and misled regulators about its failure to root out fake accounts that spread disinformation. made clear in the document.

Peiter Zatko, Twitter’s head of security until he was fired earlier this year, last month filed a whistleblower complaint with the SEC, the Federal Trade Commission, and the Department of Justice. nonprofit Whistleblower Aid said it had exhausted all attempts to resolve concerns internally before Zatko was fired in January.

One of Zatko’s most serious charges is that he violated the terms of the 2011 FTC settlement by falsely claiming Twitter took stronger measures to protect user security and privacy. Zatko also accuses the company of engaging in deception related to handling “spam” or fake accounts, an allegation central to Musk’s attempt to pull out of his Twitter hijack.

Twitter said on Tuesday that Zatko had been fired for “ineffective leadership and poor performance,” adding, “This allegation and opportunistic timing will draw attention and hurt Twitter, its customers and shareholders. seems to be intended,” he said. The company called his complaint a “false narrative” that was “full of contradictions and inaccuracies and lacking important context.”

Musk called off the sale in July, claiming Twitter had not provided a detailed methodology for calculating fake accounts. I asked Musk to order the purchase.

Twitter has set September 13 as the date shareholders will vote on Musk’s pending acquisition of the company, with the board recommending approval.

A trial in the Twitter lawsuit is scheduled for October.

Musk agreed to buy Twitter privately in April, offering $54.20 per share and pledging to ease the company’s content crackdown and root out fake accounts. As part of the deal, Musk and Twitter agreed to pay the other a $1 billion split fee if either party was responsible for the deal’s demise.

Twitter responded by saying that reviews of fake accounts are done manually by humans who check thousands of accounts. Accounts are randomly selected and employees use a complex set of rules that “define spam and platform manipulation.” According to the letter, if an account violates one or more of the rules, it will be considered fake, and the fake account will undergo multiple stages of review and be investigated by multiple trained employees. … apparently …

The SEC also questioned Twitter’s disclosure that it had overestimated the number of monetizable accounts from the first quarter of 2019 through the end of last year. The agency wrote that the error persisted for three years and asked why the company didn’t see it as a weakness in financial reporting and management.

In response, Twitter said the account’s overrepresentation had no impact on its financial statements, and that the overrepresentation represents less than 1% of its average monetizable daily users.

Twitter shares rose just over 1% in Wednesday afternoon trading.