TWTR - Twitter whistleblower testifies company is misleading on security (updated)

Updated: As of 11:40 a.m., as the Senate subcommittee took a testimony break, Twitter ( NYSE: TWTR ) stock turned positive after declines much of the morning.

The Twitter ( TWTR ) whistleblower told a Senate committee Tuesday that the social-media platform was a decade behind industry security standards, risking exploitation that could cause harm to users.

Peiter "Mudge" Zatko, who filed his whistleblower complaint in July, said "I'm here today because Twitter leadership is misleading the public, lawmakers, regulators and even its own board of directors."

Zatko was hired in a key security role in November 2020 . The problems Zatko says he found centered in two basic issues: "First, they don't know what data they have, where it lives, or where it came from. And so unsurprisingly, they can't protect it. And this leads to the second problem, which is the employees then have too much access to too much data and too many systems."

"You can think of it this way, which is it doesn't matter who has keys if you don't have any locks on the doors," Zatko said.

The committee hearing is focused on the public-interest, data-security aspects of Zatko's revelations - but the investing world is looking at the testimony through the lens of Elon Musk's multiple attempts to get out of a $44B contract to buy Twitter ( TWTR ) and take it private.

Whether Zatko's testimony helps Musk at all is an open question. The Delaware judge overseeing Twitter's suit to force Musk's follow-through on the deal has allowed Musk to amend his counterclaim to include some information from Zatko's complaint, but not a wide berth (only limited additional discovery ).

Sen. Charles Grassley says Twitter was invited to testify but refused due to the Delaware litigation.

The disclosure that Twitter ( TWTR ) reached a $7M settlement with Zatko in June tied to his lost compensation led Musk to claim an additional reason to cancel his deal .

Twitter stock ( TWTR ) had been down ( by 1.6% ), though so was nearly every other company in the S&P 500 after today's hot inflation data.

Twitter's other big story of the day comes as it's reportedly cruising toward an unsurprising shareholder approval of the $44B deal .

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