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SEC asked Twitter about its spam account claims in June

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Parag Agrawal, CEO of Twitter, and his wife Vineeta Agarwal, walk to a morning session through the Allen & Company Sun Valley Conference on July 07, 2022 in Sun Valley, Idaho.

Kevin Dietsch | Getty Images News | Getty Images

The Securities and Exchange Commission asked Twitter in June for added information on the way it calculates the share of spam accounts on its platform, latest filings revealed Wednesday.

Twitter’s spam account calculations have been the focus of Tesla CEO Elon Musk’s countersuit against the corporate, which initially sued him for attempting to get out of his $44 billion deal to purchase the social media platform. Musk has questioned Twitter’s assertions that lower than 5% of its monthly day by day lively users (mDAU) are spam accounts, because it states in its securities filings. Twitter has stood by that figure.

Wednesday’s disclosure shows it isn’t just Musk who sought to validate Twitter’s calculations, though nothing within the filings indicates the agency is formally disputing the numbers or pursuing legal motion.

The filings come a day after a whistleblower, former Twitter security lead Peiter “Mudge” Zatko,” alleged “extreme, egregious deficiencies by Twitter” related to privacy, security and content moderation.

Twitter didn’t immediately reply to a request for comment.

In a letter to Twitter CEO Parag Agrawal on June 15, the SEC asked the corporate to reveal its methodology for accounting for spam accounts, to the extent that it’s material. The agency also asked for clarification on how Twitter discovered an error in its mDAU calculations from 2019. Twitter disclosed the error this yr, saying it had previously overstated the figure.

“Provided that the error continued for 3 years, please tell us the way you concluded there was not a cloth weakness in your internal control over financial reporting and that your disclosure controls and procedures were effective as of March 31, 2022,” the SEC wrote.

In a letter on June 22, a lawyer for Twitter from Wilson Sonsini responded to the SEC’s questions, saying that individuals manually review 1000’s of randomly chosen accounts out of those it counts as mDAUs. The reviewers are given a algorithm defining spam or platform manipulation, and an account is marked as spam or false if it violates at the least considered one of those rules, in line with the letter.

The corporate also explained why it didn’t think there was a cloth weakness in its internal financial reporting controls in consequence of the overstatement of mDAUs in 2019. It said data scientists at the corporate discovered the overstatement in 2022 while investigating potential latest product features for secondary accounts. Twitter said it found that when users had separate accounts linked together, its system would count all of the linked accounts as mDAUs, even when just the first account was lively in that period.

Twitter said the overstatement didn’t affect other metrics or its financial statements and that “the overstatement represented lower than one percent of mDAU for every of the quarters from the fourth quarter of 2020 through the fourth quarter of 2021.”

On July 27, the SEC wrote to Agrawal that it had accomplished its review of Twitter’s filings and reminded him that “the corporate and its management are accountable for the accuracy and adequacy of their disclosures.”

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