A new filing made public on Wednesday regarding the Twitter v. Elon Musk lawsuit revealed that the Securities and Exchange Commission (SEC) conducted a review of how Twitter calculates the percentage of spam accounts on its platform.
Eyebrows first rose when Tesla CEO Elon Musk withdrew from his Twitter acquisition amid accusations that Twitter shared a false bot count. Twitter says that spam bots comprise less than five percent of its monthly daily active users (mDAU), whereas Musk argues otherwise, claiming that roughly 20 percent of the platform’s mDAUs are spam bots.
The SEC’s review began roughly a week before whistleblower, and Twitter’s former head of security Peiter “Mudge” Zatko revealed that the company is practicing “extreme, egregious deficiencies” related to privacy, security and content moderation.
In a letter to Twitter CEO Parag Agrawal, the SEC wrote the following:
“You disclosed that an error was made in March 2019 which resulted in an overstatement of mDAU from the first quarter of 2019 through the fourth quarter of 2021. Please discuss how the error was discovered, when and by whom. 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.”
Subsequently, a Twitter lawyer responded to the SEC‘s letter explaining how the company calculates the percentage of bot accounts, saying that people manually review randomly chosen accounts out of those it counts as mDAUs. The accounts go through a checklist of rules defining spam or platform manipulation, and accounts are subsequently marked as spam if any of the rules are violated.
The SEC completed its review on July 27th, and gave no conclusion to its review, other than saying that “We have completed our review of your filings. We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff.”
Twitter’s lawyers have said in the past that it “deploys an array of spam-detection capabilities that typically result in the removal of more than a million spam accounts each day during or shortly after creation, including both automated and manual reviews of accounts and activity on the Twitter platform.”
On the other hand, Zatko says that the way Twitter calculates its mDAU is the primary cause of increasing bot and spam activity on the platform, and that the higher-ups at the company were “concerned that if accurate measurements [of bot activity] ever became public, it would harm the image and valuation of the company,” via The Verge.
The trial for the case is set to take place on October 17th in Delaware, and will determine whether the social media company can force the world’s richest man to complete the purchase.