A Twitter informant disclosed that employees are concerned that a Chinese agent may be collecting user data

By Sheila Dang and David Shepardson

(Reuters) – The FBI announced Twitter Inc (NYSE: ) at least one Chinese agent working for the company raised new concerns about foreign interference at the influential social media platform when a whistleblower testified in a Senate hearing Tuesday that U.S. Sen. Chuck Grassley said.

Notorious hacker Peter “Mudge” Zatko, who served as Twitter’s chief security officer until he was fired in January, said some Twitter employees were concerned that the Chinese government could collect data on the company’s users.

Twitter has been criticized for its security in the past, especially in 2015. In 2020, teenage hackers took over dozens of high-profile profiles, including that of former US President Barack Obama.

Zatco’s testimony before the Senate Judiciary Committee on Tuesday revealed for the first time that the company was told by Chinese government agents working at the social media company that Twitter’s security issues could be serious.

Still, Twitter shares rose about 1 percent amid a heavy market selloff. The stock moves only on sentiment about whether billionaire Elon Musk will be forced to complete a $44 billion deal to buy the company, and investors on Tuesday’s gains saw no new details supporting Musk’s push to walk away from the deal.

And while Republican Grassley wondered how Twitter CEO Parag Agrawal would continue his job if the allegations were true, many senators used the testimony to support legislation to rein in Big Tech’s market power, with some calling for immediate action against Twitter.

Dan Ives, an analyst at Wedbush Securities, said the Chinese agent allegations will create a continuing public relations nightmare for Twitter and investors will demand to know more.

During his testimony, Zatko referenced a Reuters story on Tuesday that detailed internal conflicts between groups that want to maximize ad revenue from Chinese advertisers and others worried about doing business in China amid geopolitical tensions.

“It was a big internal conflict,” Zatko said, adding that the company was reluctant to turn to overseas markets for its fast-growing advertising revenue from China.

“In short, if we were in bed earlier, it would be a problem if we lost that source of income,” he said.

Zatko said on Tuesday that a week before he was fired from Twitter, the FBI knew that an agent of China’s Ministry of State Security, or the country’s top spy agency, the MSS, was on Twitter’s payroll for the company.

A Twitter spokesperson said the hearing “merely confirms that Mr. Zatko’s allegations are inconsistent and false.”

The spokesperson added that Twitter’s hiring process is free from outside influence and access to information is governed by background checks and a monitoring and identification system.

Zatco said on Tuesday that an outside agent recalled a conversation with another Twitter executive about the threat at the company. The executive said, “Well, since we have one, what’s wrong with having more?”

Debate against Musk

Grassley of Tesla (NASDAQ: ) Inc. Agrawal declined to appear at the hearing for fear of jeopardizing the company’s lawsuit against Elon Musk, the CEO of Twitter and Musk. A deal must be concluded.

Twitter shareholders approved Musk’s purchase of the company, Twitter said after holding a virtual special meeting of shareholders on Tuesday.

The San Francisco-based company sued Musk for terminating the deal, and Musk alleged that Twitter misrepresented the number of fake and spam accounts on its service.

Ann Lipton, a professor at Tulane University School of Law, said the little Zatko said seemed particularly helpful in getting Musk out of the deal.

The terms of the settlement do not include changes to the law that Congress could take, and Zatko said the FTC’s fines are worth the cost to the business. Lipton suggests that regulatory action against Twitter would not rise to the level of a material event that would invalidate the settlement agreement.

The lack of evidence to support Zatco’s claims that Twitter didn’t have adequate controls for spam bots also doesn’t help Musk’s legal team use the case to close the deal, Ives said.

A Delaware judge ruled last week that Musk’s Twitter lawsuit could include a Zatco whistleblower claim, but denied his request to delay the trial.

The Senate Committee on Zatkon claims Twitter misled regulators about complying with a 2011 settlement with the Federal Trade Commission over improper handling of user data.

Since then, Twitter has “made little meaningful progress on basic security, integrity and privacy systems,” Zatco’s complaint to administrators said in July.

Zatco’s whistleblower complaint appears to contain more than two pages of links to supporting documents, such as emails between Zatco and Agrawal and an assessment of misinformation and disinformation on Twitter.

The number of documents was limited compared to that provided by whistleblower Francis Haugen, who released thousands of internal materials at Facebook (NASDAQ: