Kind of depends on the terms of the deal, namely whether it's an asset deal as opposed to a stock deal. In the latter Twitter would assume liability for contracts. In the former they just acquire IP and hire away the employees.

Acquirers usually prefer asset deals for this reason as it allows them to leave unpleasant liabilities behind. There's generally some sort of shell left that goes through wind down but it has few/no assets attached. In this case you can try to go after the original investors including founders or other shareholders (the IRS may do this if there tax issues) but since there's nobody home you are less likely to get much out of a favorable judgement.

This seems like the kind of thing a legal system should be designed to help defend the market against. It's a net negative to the economy as a whole to let torpedoes like this fly without consequence; and evidently, a totally Laissez-faire market will engineer ways to insulate the perpetrators against the damages rather than the insulate economy as a whole against the splash.

On the flip side asset deals also let acquisitions proceed that would otherwise be blocked due to uncertainty about liability, which is another way of saying that the acquirer can't properly assess value of the investment. I have been through this process and have some experience with the type of issues that can arise--in our case they had nothing to do with screwing customers. It's possible Smyte would have just disappeared anyway.

Moreover recovering damages in this kind of case is time-consuming, doubtful, and too late to fix anything. (Like closing the door after the horse is gone.)

What's left is reputation--the names of the founders of Smyte are listed at https://www.crunchbase.com/organization/smyte. I would have some pretty hard questions if they ever showed up in a deal or looking for work.

p.s., According to the Techcrunch page "Smyte stops bad actors on marketplaces and social networks." You can't make this stuff up.

I'm pretty sure their contracts covered their ass. Hence why lawyers write up contracts in the first place.

You can write just about any words you like into a contract. But that doesn't mean they are enforceable and doesn't mean a legislature or court can't add or modify clauses. Then there's the whole doctrine of equity thing over the top of it. In law there are always a whole bunch of fine-grained questions that can change the whole outcome.

I expect one or more lawsuits to emerge, maybe as a class action. It might not come to trial and simply wash up as a settlement.

I am not now, nor have I ever been, a lawyer.

Both parties presumably had lawyers writing ass-covering contracts, so who loses? This isn't the usual "Wells Fargo screws you over then forces arbitration where you lose again" imbalance, there's no particular reason to think Smyte could have swung a favorable contract with e.g. ZenDesk.

It really depends on who was negotiating, whose paper was used to write the contract, and how much each side wanted the deal. Legacy enterprises like Disney often force vendors to use the legacy company's paper, which case substantial protections would be written in or the deal would not happen.

Self-service web services on the other hand generally come with take-it-or-leave-it conditions of use. When's the last time you redlined Github terms of use when starting a project? ;)