Weeks before he accepted a $1 billion offer from Facebook, Instagram CEO Kevin Systrom had verbally agreed to sell his photo-sharing company to Twitter for $525 million.
According to sources quoted in the New York Times, Systrom then called off the deal, resulting in Facebook snapping up the site.
Facebook CEO Mark Zuckerberg acquired Instagram after pushing through a cash-and-stock deal just weeks before Facebook's May initial public offering.
The transaction closed in September at a $715 million valuation, reflecting Facebook's stock drop since the offering.
During negotiations with Instagram, Twitter executives had handed Systrom a term sheet outlining the details of the proposed deal, the Times reported, but Systrom later told California state regulators under oath that his company had not received any "formal offers or term sheets" from potential buyers aside from Facebook.
Relations between Twitter, Instagram and Facebook have soured since Facebook successfully swooped for the photo service. Earlier this month Instagram shut off a functionality that allowed Twitter to display Instagram pictures, while Twitter introduced its own photo color-filters to compete with Instagram.
A spokeswoman for Facebook declined comment. Twitter could not be immediately reached for comment.
