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Trump’s App Truth Social Deal Goes Under Investigation as Digital World Acquisition Faces Subpoenas

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The company planning to buy Donald Trump’s new social media business has disclosed a federal grand jury investigation that, it says, could impede or even prevent its acquisition of the Truth Social app.

Shares of Digital World Acquisition dropped 10 percent in morning trading on Monday as the company revealed that it has received subpoenas from a grand jury in New York.

The Justice Department subpoenas follow an ongoing probe by the Securities and Exchange Commission into whether Digital World broke rules by having substantial talks about buying Trump‘s company starting early last year before Digital World sold stock to the public for the first time in September, just weeks before its announcement that it would be buying Trump’s company.

Trump’s social media venture launched in February as he seeks a new digital stage to rally his supporters and fight Big Tech limits on speech, a year after he was banned from Twitter, Facebook and YouTube.

The Trump Media & Technology Group — which operates the Truth Social app and was in the process of being acquired by Digital World — said in a statement that it will cooperate with “oversight that supports the SEC’s important mission of protecting retail investors.”

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The new probe could make it more difficult for Trump to finance his social media company. The company last year got promises from dozens of investors to pump $1 billion (nearly Rs. 7,800 crore) into the company, but it can’t get the cash until the Digital World acquisition is completed.

Stock in Digital World rocketed to more than $100 (nearly Rs. 7,800) in October after its deal to buy Trump’s company was announced. The stock traded at just around $25 (nearly Rs. 2,000) in morning trading on Monday.

See also  Facebook Shuts Funding for US News Partnerships Program Amid Economic Downturn, Changing User Behaviour

Digital World is a special-purpose acquisition company, or SPAC, part of an investing phenomenon that exploded in popularity over the past two years.

Such “blank-check” companies are empty corporate entities with no operations, only offering investors the promise they will buy a business in the future. As such they are allowed to sell stock to the public quickly without the usual regulatory disclosures and delays, but only if they haven’t already lined up possible acquisition targets.

Digital World said in a regulatory filing on Monday that each member of its board of directors has been subpoenaed by the grand jury in the Southern District of New York. Both the grand jury and the SEC are also seeking a number of documents tied to the company and others including a sponsor, ARC Global Investments, and Miami-based venture capital firm Rocket One Capital.

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Some of the sought documents involve “due diligence” regarding Trump Media and other potential acquisition targets, as well as communications with Digital World’s underwriter and financial adviser in its initial public offering, according to the SEC disclosure.

Digital World also Monday announced the resignation of one of its board members, Bruce Garelick, a chief strategy officer at Rocket One.


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Mark Zuckerberg Calls Apple’s App Store Moderation Rules a ‘Conflict of Interest’

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Meta Chief Executive Officer Mark Zuckerberg said that Apple’s App Store presents a conflict of interest, adding his voice to a flurry of criticism of the iPhone maker’s software policies. “It is problematic for one company to be able to control what app experiences end up on a device,” Zuckerberg said Wednesday in an interview at the New York Times DealBook conference. The “vast majority of profits in mobile ecosystem go toward Apple,” he added.

App Store policies and fees implemented by Apple, and to a lesser extent Google parent Alphabet, have long been a point of contention for technology companies looking to reach broad mobile audiences. Billionaire Elon Musk added to the chorus after his acquisition of Twitter, sending a flurry of tweets this week denouncing Apple’s fees and restrictions on what apps can be sold.

Zuckerberg echoed some of Musk’s points. He called Apple’s content moderation rules for apps a “conflict of interest” since they are often pointed at rivals. It makes Apple “not just a governor looking out for people’s interests.” Revenue at Meta, which owns social networks Facebook and Instagram, has taken a hit since Apple tightened its privacy policies to restrict how users can be tracked and targeted with advertising.

Though Zuckerberg seemed to back up his objection to Apple’s policies, Musk on Wednesday walked back some of his criticism of the iPhone maker, saying he met with CEO Tim Cook at the company’s headquarters and had a “good conversation” that resolved a “misunderstanding” about Twitter’s place in the App Store.

As for Musk’s approach to running Twitter, Zuckerberg hedged his comments — he said he guesses that some approaches will work and others won’t. “I think it’ll be very interesting to see how this plays out,” he said.

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On whether Meta would allow former US President Donald Trump back onto Facebook, Zuckerberg didn’t answer, but pointed to prior guidance the company has gotten from its external Oversight Board, weighing in on difficult content decisions. Meta is expected to make a decision in January.

See also  Elon Musk's Twitter Deal Threats Said to Put New Financing on Hold

Wall Street has become increasingly bearish on Meta’s investment in its money-losing virtual reality business amid slowing ad revenue. Earlier this month, Zuckerberg said the company would slash more than 11,000 jobs, and took personal responsibility for decisions that led to the need to cut costs. In April, Meta reported its first-ever quarterly revenue drop.

The interview Wednesday began with a recorded conversation between Zuckerberg and the moderator as avatars in the immersive digital world the company calls the metaverse. Still, Zuckerberg said the idea that Meta is wholly focused on the metaverse is “basically wrong.” Messaging program WhatsApp will be his next major monetization target, he said, as that platform is “largely untapped.”

He cited progress in Reels, the company’s short video feature, saying some estimates show it has half the traffic of viral video-sharing app TikTok outside of China.

Zuckerberg also raised the issue of TikTok’s ownership by Beijing-based ByteDance, adding that there are “real questions” about the influence of China’s government on TikTok. “In a lot of countries, all data goes to the government,” the CEO said.

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© 2022 Bloomberg L.P.


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Twitter Faces Ban Over Content Moderation, EU Chief Warns Elon Musk: Report

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The European Union has threatened Elon Musk’s Twitter with a ban unless the billionaire abides by its strict rules on content moderation, setting up a regulatory battle over the future of the social media platform, the Financial Times reported on Wednesday.

EU industry chief Thierry Breton made the threat during a video meeting with Musk on Wednesday, the FT reported, citing people with knowledge of the conversation.

Breton told Musk he must adhere to a checklist of rules, including ditching an “arbitrary” approach to reinstating banned users and agreeing to an “extensive independent audit” of the platform by next year, according to the report.

Twitter and the EU did not immediately respond to Reuters’ requests for comment.

Breton had previously urged Musk to comply with landmark EU rules against online hate speech and disinformation. The European Commission’s justice chief Didier Reynders had also voiced similar comments.

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Reuters reported in October that Elon Musk had assured the European Commission that Twitter will continue to abide by tough European rules on illegal online content policing now the social network has passed under his ownership.

The assurances from Musk appeared to suggest a pragmatic attitude from the CEO of electric car maker Tesla, who has previously expressed his desire to see Twitter have fewer limits on content that can be posted.

In May this year, EU industry chief Thierry Breton met Musk in Texas and the two signalled agreement on EU digital media regulation ahead of Musk’s purchase of Twitter.

The previous meeting came weeks after the world’s richest man clinched a deal to buy the social media company for $44 billion (roughly Rs. 3,40,270 crore) in cash.

See also  Facebook Must Pay Compensation to Rohingyas Over Online Hate Speech Campaign, Amnesty International Says

In a video with the two men posted on Twitter by Breton, the EU official tells Musk that he explained the Digital Services Act to Musk. “It fits pretty well with what you think we should do,” Breton tells Musk in a tweet that included the hashtag #DSA.

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“I think it’s exactly aligned with my thinking,” Musk responds.

The two did not go into detail on the new law, which levies hefty fines on companies if they do not control illegal content. The rules ban advertising aimed at children or based on religion, gender, race, and political opinions, for example.

© Thomson Reuters 2022


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Twitter Not Safer Under Elon Musk Leadership, Says Former Head of Trust and Safety

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Twitter’s former head of trust and safety Yoel Roth on Tuesday said the social media company was not safer under new owner Elon Musk, warning in his first interview since resigning this month that the company no longer had enough staff for safety work.

Roth had tweeted after Musk’s takeover that by some measures, Twitter safety had improved under the billionaire’s ownership.

Asked in an interview at the Knight Foundation conference on Tuesday whether he still felt that way, Roth said: “No.”

Roth was a Twitter veteran who helped steer the social media platform through several watershed decisions, including the move to permanently suspend its most famous user, former US President Donald Trump, last year.

His departure further rattled advertisers, many of whom backed away from Twitter after Musk laid off half of the staff, including many involved with content moderation.

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Before Musk assumed the helm at Twitter, about 2,200 people globally were focused on content moderation work, said Roth. He said he did not know the number after the acquisition because the corporate directory had been turned off.

Twitter under Musk began to stray from its adherence to written and publicly available policies toward content decisions made unilaterally by Musk, which Roth cited as a reason for his resignation.

“One of my limits was if Twitter starts being ruled by dictatorial edict rather than by policy … there’s no longer a need for me in my role, doing what I do,” he said.

The revamp of the Twitter Blue premium subscription, which would allow users to pay for a verified checkmark on their account, launched despite warnings and advice from the trust and safety team, Roth said.

See also  Elon Musk's Twitter Deal Threats Said to Put New Financing on Hold

The launch was quickly beset by spammers impersonating major public companies such as Eli Lilly, Nestle and Lockheed Martin.

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Roth also said Tuesday that Twitter erred in restricting the dissemination of a New York Post article that made claims about then-Democratic presidential candidate Joe Biden’s son shortly before the 2020 presidential election.

But he defended Twitter’s decision to permanently suspend Trump for risk of further incitement of violence after the riot at the US Capitol on January 6, 2021.

“We saw the clearest possible example of what it looked like for things to move from online to off,” Roth said. “We saw people dead in the Capitol.”

Musk tweeted on November 19 that Trump’s account would be reinstated after a slim majority voted in favour of the move in a surprise Twitter poll.

© Thomson Reuters 2022

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