Twitter offered to buy Instagram for $525 million in cash and stock this March, Nick Bilton at the New York Times reports.
This was three weeks before Mark Zuckerberg closed a deal to buy Instagram for $1 billion (at the time).
Unlike most reports of an almost-deal, this one, according to Bilton, could lead to legal trouble for Instagram CEO Kevin Systrom.
In August, Systrom testified to the California Corporations Department about the Facebook deal. It was a way to speed up approval of the acquisition.
During the hearing Systrom was asked if he had ever received competing offers. He said, "We never received any formal offers or term sheets."
But, Bilton's sources say Systrom verbally agreed to the $525 million deal with Twitter before backing out, saying he wanted to keep the company independent. Further, he did get a term sheet, which is an outline of a formal deal, from Twitter. He didn't kept the term sheet, however.
Bilton says Systrom previously worked in M&A at Google, so he knew the ins and outs of acquisitions. Bilton also says Systrom never met at Twitter's offices or Instagram's; instead they always met somewhere neutral like a restaurant. When he was given the term sheet, he read it over, memorized it, then handed it back to Twitter.
It's unclear whether Systrom and Facebook will be in trouble if Bilton's story is accurate. It would be up to the California Corporations Department. And it tells Bilton, "[we have] not received any complaints or protests of our original fairness hearing proceedings in the Facebook/Instagram acquisition."
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