The U.S. Securities and Exchange Commission is questioning social media giant Twitter on how it determines the number of fake accounts on its platform.
The securities
regulator in June questioned the company about its method for calculating false
or spam accounts and “the underlying judgments and assumptions used by
management,” The Associated Press reports.
Twitter admits
5% of its 238 million active monthly users are fake, some of which are either
spam or bots that may spread misinformation. The SEC position is anchored on
Twitter’s potential advertisements that run across real and fake accounts. The company’s
advertisement earnings make up more than 90% of the social giant revenue, according
to The Associated Press.
In a June 15
letter, SEC’s Division of Corporation Finance questioned the company’s
methodology before Tesla CEO Elon Musk raised the same issue, accusing the
company of undercounting the number of fake accounts in a bid to unfairly boost
the number of real users, according to The Associated Press. Mr. Musk pulled
out of the $44 billion deal but Twitter sued the multi-billionaire businessman.
In a June 22
letter, the law firm Wilson Sonsini of Palo Alto, California replied to the SEC
letter saying Twitter adequately disclosed the methodology in its annual report
filed in 2021, according to The Associated Press.
The letter
noted that Twitter estimates the number of fake accounts with an internal review
of sample accounts, adding that the number of fake accounts “represent the average false or spam accounts
in the samples during each monthly analysis period during a quarter,” according
to The Associated Press.
The letter
admitted that fewer than 5% of Twitter’s “monetizable” daily active users were
fake accounts in the fourth quarter of last year, the period that the SEC had
questioned.
SEC posted
the letter in a filing Wednesday following a whistleblowing complaint by
Twitter’s former head of security Peiter Zatko that the company misled
regulators about its poor cybersecurity defenses and its negligence in
attempting to stem out fakes accounts on the platform, according to The
Associated Press.
Zatko who was
fired earlier this year filed a complaint in July with the SEC, the federal
Trade Commission and the Department of Justice, The Associated Press reports.
The
Associated Press quoted the legal nonprofit Whistleblower Aid that is working
with Zatko, as saying he exhausted all attempts to get his concerns resolved in
the company before he was relieved of his duties this January.
Zatko
accused the company of violating the terms of a 2011 FTC settlement by falsely
claiming that it had put stronger measures in place to protect the security and
privacy of its users, according to The Associated Press. Zatko said the company
was involved in deceptions in its handling of “spam” or fake accounts.
In a
statement Tuesday, Twitter said Zatko was fired for “ineffective leadership and
poor performance” and said the “allegations and opportunistic timing appear
designed to capture attention and inflict harm on Twitter, its customers and
its shareholders,” according to The Associated Press. Twitter added that Zatko’s
complaint is “a false narrative” that is “riddled with inconsistencies and
inaccuracies and lacks important context.”
Twitter told
SEC in a response that the review of fake accounts is done manually by humans
who check thousands of them, adding that an account is considered false if it
violates one or more of the rules, The Associated Press reports. The company
said the fake accounts are investigated by multiple trained employees, adding
that the accounts are chosen randomly. The employees use a complex set of rules
“that define spam and platform manipulation,” according to The Associated
Press.