Violation of sanctions
Blue ticks for Hezbollah: How Musk’s business model for X is now getting him in a lot of trouble
In the fall of 2022, Elon Musk bought Twitter – and has since renamed the short message service X
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With his subscription offer, Elon Musk finally wants to make his short message service X profitable. But he probably should have turned down some paying customers. For example, because they are considered terrorists.
This is shown by a study by the Tech Transparency Project (TTP), a non-governmental organization that wants to encourage tech companies to act more responsibly. According to the report, the short message service “provides its premium services to two terrorist group leaders and several other U.S.-sanctioned organizations.” The problem: This is explicitly prohibited under current US law.
Terrorists and sanctioned banks
According to the watchdogs, the two terrorist leaders are the leaders of the Lebanese Hezbollah. The military wing of the party of the same name is considered a terrorist group by the USA and Germany. Iranian and Russian organizations were also displayed by X as payment accounts. However, this violates the US sanctions against the two countries: business with sanctioned countries and organizations is only permitted for US companies like X with an exemption from the government.
X can hardly make the argument that he didn’t know who he was dealing with. The Hezbollah Secretary General, Hassan Nasrallah, was explicitly shown as “ID verified”. To do this you have to identify yourself with a valid document and a selfie. Two of the sanctioned organizations, Russia’s Tinkoff Bank and Iranian state television, were even part of the verified company program. The golden hook that signals this costs 1,130.50 euros per month.
And Musk cannot shift the blame onto the previous owners either: 18 of the accounts identified in the TTP report were verified after April 2023 – long after Musk took over the company.
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Musk’s X denies blame
The short message service commented on the allegations in a statement. “X has a robust and secure approach to our monetization functions that complies with legal obligations, as well as independent verification from our payment providers,” the company replied to a tweet from the TTP. “Several of the accounts listed in the tech transparency report are not directly named on sanctions lists, while some others may have visible account ticks without receiving services that would be subject to sanctions,” an attempt is made to put the allegations into perspective. The responsible teams would examine the situation.
In fact, some of the accounts seem to have already lost their verification. According to “Ars Technica”, Nasrallah’s account actually had a blue tick shortly after the TTP report was published, but it has since disappeared.
Violations of trade sanctions can have far-reaching consequences. US law provides for high fines, which have reached billions in the past. Even prison sentences are possible under certain circumstances. In view of the small amount of money that was paid, one should certainly not expect maximum penalties in relation to X. It is not yet known that the authorities are currently investigating.
Musk’s failed plan for X
For Musk, however, it is another blow to his short message service’s business model, which has not been particularly successful so far. Since the takeover, Musk has reactivated numerous previously blocked accounts and largely reduced moderation based on an extremely broad definition of freedom of expression. As a result, an increase in hate speech and insults was observed, and many advertisers withdrew. The fact that Musk responded by attacking customers and repeatedly sharing conspiracy theories and anti-Semitic theses made the situation even worse. The revenue from the premium model could not make up for these losses.
Nowhere is this more evident than in the value of the company: Musk paid $44 billion for Twitter in October 2022. According to the investment company Fidelity, the service is now worth a maximum of 12.5 billion dollars, reports Axios, citing internal documents from the company. Fidelity has no interest in downplaying the value: as a major investor, it made the deal possible for Musk in the first place.
Sources: Tech Transparency Project, Statement from X, Ars Technica, Axios