X “unfit” for banking because of complicity in Saudi spying, lawyers argue
Read the letter urging regulators to end Musk’s dream of turning X into a bank.
Now, as X continues filing for money-transmitting licenses—in pursuit of turning X into an "everything app," a one-stop destination where users bank, shop, communicate, and basically spend all their time online—US banking regulators are being urged to reconsider approving X's applications to provide financial services, The Guardian reported. And Ars confirmed that states that already granted licenses are being pressured to revoke them.
In an open letter reviewed by Ars, lawyers at Walden Macht & Haran LLP—who are representing a Saudi family suing Twitter/X—warned both “attorneys general and banking commissioners across 50 states” that Musk's company should be considered "unfit" to hold banking licenses. They alleged that X is unfit for banking due to its alleged treatment of users’ personal data and "intentional complicity" in human rights violations. These grievances, The Guardian reported, also call into question whether X "can be trusted to abide by federal and state laws protecting consumer data and records."
That particular lawsuit against Twitter was initially filed in May, alleging that former Twitter employees—who were charged in 2019 with conspiring with the Saudi regime to silence more than 6,000 dissidents—violated Twitter's terms of service by unmasking anonymous Twitter accounts run by Saudi users like human rights activist Abdulrahman Al-Sadhan. After Twitter's employees identified Al-Sadhan to the Saudi government, Twitter allegedly never notified him before he was reportedly kidnapped, tortured, and imprisoned in 2021—sentenced to 20 years for posting tweets mocking the royal family.
His sister, Areej, sued Twitter on behalf of her brother, accusing Twitter of looking the other way after the FBI notified Twitter of the suspected employee spying. The lawsuit argued that Twitter violated its own ToS by sharing Al-Sadhan's account information, allegedly because the company was financially motivated not to rile the Saudi government. An amended complaint in the lawsuit filed last week noted that Al-Sadhan's family has been denied contact with Al-Sadhan and "is not sure if he is alive."
Areej's complaint also noted that the Kingdom of Saudi Arabia (KSA) is Twitter/X's most important market in the Middle East, and the open letter noted that Musk knew about the spying and still allowed Saudi investors to become the second largest stakeholders in the platform.
X has not yet commented on the letter or responded to Areej's amended complaint. But as experts predicted, the company has argued that it was also a victim of its employees' covert spying.
The open letter disputed that defense, claiming that "compelling" evidence shows that Twitter was not a victim. The letter alleged that as proof of the platform's complicity, instead of cracking down on Saudi spying after the FBI alert, "Twitter began approving Saudi requests for confidential information, including 'emergency disclosures,' in 'droves.'"
"In 2016, 85 percent of all information requests were approved, eclipsing approval rates for Canada and the United Kingdom," the letter said. "While Twitter has protested that it was a 'victim' of its employees’ misconduct, the evidence we found tells a much different story—one in which a financially troubled Twitter essentially sold its corporate soul to secure KSA’s investment in Twitter and to ensure Twitter remained available in KSA, one of Twitter’s largest markets (while countries such as Turkey banned it)."
While the employee spying happened well before Musk bought Twitter, Al-Sadhan's lawyers told US regulators this week that "X’s prior and current conduct deserves 'serious and careful investigation.'" If there is no investigation, lawyers allege that the KSA could gain unprecedented access to users' confidential financial information. They've alleged that the stakes are high because X has "acted at the direction of Saudi Arabia in furtherance of the kingdom’s campaign of transnational repression."
Musk’s “long-standing” ties with Saudi Arabia
Musk's personal history with the Saudi government is also a concern, the open letter said. Last week, Newsweek reported that it appeared as if Musk's "close and long-standing financial connections to the Saudi royal family" kept the X owner from commenting when a 54-year-old retired Saudi teacher, Muhammad al-Ghamdi, was sentenced to death after criticizing the Saudi government in posts on X.
"The stakes could not be more serious," the letter said. "As Mr. Musk surely knows, last week KSA sentenced a retired schoolteacher to death because he shared tweets critical of KSA with his eight followers. A 72-year-old US citizen, Saad al-Ghambi, could have suffered the same fate but was 'pardoned' only after the US State Department brought pressure on KSA. Sadly, these are two of many, many examples of Saudi brutality and repression, which we believe has been fueled and enabled by Twitter itself."
While the letter to regulators seems tangential to the lawyers' pending complaint against Twitter/X, lawyers appended a summary of key arguments so that every state AG and banking commissioner can become more familiar with the case. They're hoping that will potentially motivate them to investigate X's Saudi ties and ultimately discontinue any plans to approve X's money-transmitting licenses. Their letter said:
“We believe Twitter is unfit to hold money-transmitting licenses. But, regardless of each state’s decision on the licenses, we urge [state banking commissioners] to use these applications to fully investigate Twitter’s prior conduct and its current financial and other entanglements with Saudi Arabia."
- He has already registered Twitter Payments LLC in Arizona, Georgia, Maryland, Michigan, Mississippi, Missouri, New Hampshire, and Rhode Island. Ars confirmed that Al-Sadhan's lawyers have already begun talks with some states in hopes of stopping new licenses from being approved or prompting granted licenses to be revoked.
Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.
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