Twitter Is Ready for a Potential Legal Battle With Elon Musk

Elon Musk may be preparing for the next chapter in his Twitter takeover journey: court.

A $44 billion deal was reached in April between Mr. Musk and Twitter, and the two sides have since been working to close the deal. Mr. Musk requested information on how many Twitter accounts are bots, and Twitter has provided Mr. Musk access to its “firehose,” or stream of tweets. It has continued to share additional information with him.

On Thursday, The Washington Post reported that the deal was in jeopardy, and that Mr. Musk’s team was “expected to take potentially drastic action.” The article’s claims, which could not be confirmed by the DealBook newsletter, took Twitter and its advisers by surprise, because they did not consider the deal to be in any further peril than at any other point in recent months.

Mr. Musk did not respond to a request for a comment. Twitter reiterated that it intended “to close the transaction and enforce the merger agreement at the agreed price and terms.”

There are many “drastic” actions Mr. Musk could take, but as it pertains to the deal, there are two clear possibilities: He could deliver a letter to Twitter saying he is terminating the deal, and he could sue Twitter. Those two actions would most likely, but not necessarily, happen simultaneously.

There are no clear grounds for Mr. Musk to try to break the deal, because Twitter has publicly disclosed that roughly 5 percent of its users are bots since it went public. But he may try to claim that this disclosure is intentionally misleading, a very high bar to meet legally.

In that case, Twitter could countersue. Twitter strongly believes that the deal contract is on its side, and that it would be an uphill battle for Mr. Musk. The deal has a “specific performance clause,” which gives the company the right to sue him and force him to complete the deal so long as the debt financing he has corralled remains intact. And even if that 5 percent estimate is off, Twitter warns in its regulatory filings that the number is an estimate and that it “could be higher than we have currently estimated.” The bar for using that as grounds to get out of a deal is high.

A case could be heard in Delaware, where Twitter is registered. Twitter would almost certainly seek an expedited case, given the size of the deal. A possible judge is Chancellor Kathaleen St. J. McCormick, who is also overseeing the Orlando Police Pension Fund’s suit over the deal.

The stakes are high. The most valuable part of Twitter right now is its acquisition agreement with Mr. Musk. Its shares are down about 24 percent since April, and trade well below the price agreed with Mr. Musk. Twitter’s stock fell 4 percent in premarket trading on Friday.

Twitter is seeing pressure on its advertising business, has frozen hiring and is laying off some staff members. To accept less than the price it originally negotiated with Mr. Musk could expose Twitter to shareholder lawsuits. So while litigation could be costly, losing the deal may be even worse.

Hacker Offers to Sell Chinese Police Database in Potential Breach

In what may be one of the largest known breaches of Chinese personal data, a hacker has offered to sell a Shanghai police database that could contain information on perhaps one billion Chinese citizens.

The unidentified hacker, who goes by the name ChinaDan, posted in an online forum last week that the database for sale included terabytes of information on a billion Chinese. The scale of the leak could not be verified. The New York Times confirmed parts of a sample of 750,000 records that the hacker released to prove the authenticity of the data.

The hacker, who joined the online forum last month, is selling the data for 10 Bitcoin, or about $200,000. The individual or group did not provide details on how the data was obtained. The Times reached out to the hacker but did not immediately receive a response.

The hacker’s offer of the Shanghai police database highlights a dichotomy in China: Although the country has been at the forefront of collecting masses of information on its citizens, it has been less successful in securing and safeguarding that data.

Over the years, authorities in China have become expert at amassing digital and biological information on people’s daily activities and social connections. They parse social media posts, collect biometric data, track phones, record video using police cameras and sift through what they obtain to find patterns and aberrations. A Times investigation last month revealed that the appetite of Chinese authorities for regular citizens’ information has only expanded in recent years.

But even as Beijing’s appetite for surveillance has ramped up, authorities have appeared to leave the resulting databases open to the public or left them vulnerable with relatively weak safeguards. In recent years, The Times has reviewed other databases used by the police in China.

China’s government has worked to tighten controls over a leaky data industry that has fed internet fraud. Yet the focus of the enforcement has often centered on tech companies, while authorities appear to be exempt from strict rules and penalties aimed at securing information at internet firms.

Yaqiu Wang, a senior China researcher at Human Rights Watch, said if the government doesn’t protect its citizens’ data, there are no consequences. In Chinese law, “there is vague language about state data handlers having responsibility to ensure the security of the data. But ultimately, there is no mechanism to hold government agencies responsible for a data leak,” she said.

Last year, for example, Beijing cracked down on Didi, China’s equivalent of Uber, after its listing effort on the New York Stock Exchange, citing the risk that sensitive personal information could be exposed. But when local authorities in the Chinese province of Henan misused data from a Covid-19 app to block protesters last month, officials were largely spared from severe penalties.

When smaller leaks have been reported by so-called white-hat hackers, who search out and report vulnerabilities, Chinese regulators have warned local authorities to better protect the data. Even so, ensuring discipline has been difficult, with the responsibility to protect the data often falling on local officials who have little experience overseeing data security.

Despite this, the public in China often expresses confidence in authorities’ handling of data and typically considers private companies less trustworthy. Government leaks are often censored. News of the Shanghai police breach has also been mostly censored, with China’s state-run media not reporting it.

“In this Shanghai police case, who is supposed to investigate it?” said Ms. Wang of Human Rights Watch. “It’s the Shanghai police itself.”

In the hacker’s online post, samples of the Shanghai database were provided. In one sample, the personal information of 250,000 Chinese citizens — such as name, sex, address, government-issued ID number and birth year — was included. In some cases, the individuals’ profession, marital status, ethnicity and education level, along with whether the person was labeled a “key person” by the country’s public security ministry, could also be found.

Another sample set included police case records, which included records of reported crimes, as well as personal information like phone numbers and IDs. The cases dated from as early as 1997 until 2019. The other sample set contained information that appeared to be individuals’ partial mobile phone numbers and addresses.

When a Times reporter called the phone numbers of people whose information was in the sample data of police records, four people confirmed the details. Four others confirmed their names before hanging up. None of the people contacted said they had any previous knowledge about the data leak.

In one case, the data provided the name of a man and said that, in 2019, he reported to the police a scam in which he paid about $400 for cigarettes that turned out to be moldy. The individual, reached by phone, confirmed the details described in the leaked data.

Shanghai’s public security bureau declined to respond to questions about the hacker’s claim. Calls to the Cybersecurity Administration of China went unanswered on Tuesday.

On Chinese social media platforms, like Weibo and the communication app WeChat, posts, articles and hashtags about the data leak have been removed. On Weibo, accounts of users who posted or shared related information have been suspended, and others who talked about it have said online that they had been asked to visit the police station for a chat.