Yahoo was hit in an attack that saw details of 500 million accounts compromised.
Yahoo may see $1 billion slashed off its price tag in its acquisition by Verizon as controversies mount around a 2014 cyber attack.
Verizon is pushing for the price to be cut with fierce resistance by Yahoo, according to the New York Post.
Yahoo is reeling from the discovery of a colossal cyber attack in 2014, which led to over 500 million email account details being stolen from within Yahoo’s network.
The situation worsened when Reuters revealed in a report that Yahoo had secretly built a software programme that would search customer emails for specific information requested by US intelligence officials at the National Security Agency or FBI.
This involved scanning hundreds of millions of Yahoo Mail accounts.
The revelations come after years of poor performance at what was formerly one of the pre-eminent internet companies. Activist investors such as SpringOwl have attempted to push the company towards cutting back on employee perks.
Yahoo has gradually seen its share of internet search traffic eroded by Google in particular but also Microsoft’s Bing, as well as failing to capitalise on growth in the mobile market.
US telecoms giant Verizon agreed to pay $4.8 billion to acquire Yahoo after the company failed to achieve a turnaround in its core internet business.
The deal will cover Yahoo’s core internet business and some real estate assets.
Yahoo shareholders will retain a 35.5 percent stake in Yahoo Japan, as well as a 15 percent interest in Chinese e-commerce giant Alibaba.
The deal came after weeks of Yahoo searching for a buyer.
There are clauses in the acquisition agreement that Verizon could theoretically activate in order to terminate or renegotiate the deal.
If the Verizon deal falls through, Yahoo may have to search for a new buyer. It is also facing numerous consumer lawsuits and possible regulatory action.