Texas AG Investigates 'Fake' Twitter Accounts as Musk Threatens to Ax Deal

Republican Texas Attorney General Ken Paxton has begun an investigation into Twitter's "fake bot accounts" as lawyers for billionaire Elon Musk threaten to cancel his deal to buy the platform over the same issue.

Paxton's office said in a Monday release that an investigation had been launched into "whether Twitter's reporting on real versus fake users is 'false, misleading, or deceptive'" under Texas law. Lawyers for the Tesla CEO, who moved to Texas in 2020 and more recently pledged to "vote Republican," wrote a letter to Twitter on the same day, threatening to cancel his $44 billion purchase over claims that the platform was not providing adequate data about the fake accounts.

"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," Paxton said in a statement. "If Twitter is misrepresenting how many accounts are fake to drive up their revenue, I have a duty to protect Texans."

The release from Paxton's office gave Twitter a June 27 deadline "to respond to Attorney General Paxton's Demand," arguing that the investigation required the company "to turn over documents related to how it calculates and manages its user data and how these numbers relate to Twitter's advertising businesses."

The release also noted that Twitter had been under "intense scrutiny" for disclosing in company filings that 5 percent of accounts were fake, while "they may in fact comprise as much as 20% or more." A claim that 20 percent of Twitter accounts are fake was previously made by Musk. Neither Musk nor Paxton's office have offered any evidence to back up the claim, or explanation on how they arrived at the figure.

In a letter disclosed in a filing with the U.S. Securities and Exchange Commission on Monday, Musk's lawyers argued that he is "clearly entitled to the requested data to enable him to prepare for transitioning Twitter's business to his ownership and to facilitate his transaction financing," while adding that "Mr. Musk believes the company is actively resisting and thwarting his information rights."

Musk's lawyers argued that Twitter's refusal to comply with his demands constituted a "clear material breach of Twitter's obligations under the merger agreement" that would allow him the "right not to consummate the transaction and his right to terminate the merger agreement."

Although Musk agreed to purchased Twitter at $54.20 a share in April, the value of both Twitter and Tesla dropped in the weeks that followed. Musk said that the deal was "on hold" May 13 over the alleged discrepancy in the number of fake accounts.

A spokesperson for Twitter declined comment on both Paxton's investigation and the letter from Musk's lawyers when contacted by Newsweek.