CrowdStrike shareholders sued the cybersecurity business for concealing how its poor software testing caused the July 19 global outage that crashed over 8 million machines
On Tuesday evening, shareholders filed a proposed class action in the federal court in Austin, Texas, alleging that CrowdStrike’s assurances regarding its technology were materially false and misleading.
The issue was revealed when a flawed software update disrupted airlines, banks, hospitals, and emergency lines worldwide.
They reported that CrowdStrike’s share price plummeted by 32% over the next 12 days, resulting in a loss of $25 billion in market value.
This occurred as the consequences of the outage became apparent. Chief Executive George Kurtz was summoned to testify before the U.S. Congress, and Delta Air Lines reportedly retained the services of renowned attorney David Boies to pursue compensation.
The complaint cites statements from a March 5 conference call, during which Kurtz described CrowdStrike’s software as “validated, tested, and certified.”
CrowdStrike, an Austin-based corporation, stated on Wednesday, stating, “We think that this case is without merit and will provide our company with the utmost defense.” Additionally, Kurtz and Chief Financial Officer Burt Podbere are defendants.
Holders of CrowdStrike Class A shares between November 29, 2023, and July 29, 2024, seek unspecified damages in the lawsuit initiated by the Plymouth County Retirement Association of Plymouth, Massachusetts.
If unexpected negative news results in a decline in stock prices, shareholders frequently file litigation against companies. CrowdStrike may be subject to additional lawsuits.
Delta’s Chief Executive, Ed Bastian, disclosed to CNBC on Wednesday that the disruption resulted in a $500 million loss for the airline, encompassing compensation and accommodations for stranded passengers.
On Wednesday, CrowdStrike’s shares closed at $231.96, a $1.69 decline. On the day preceding the outage, they closed at $343.05.
The case is Plymouth County Retirement Association v CrowdStrike Inc et al., U.S. District Court, Western District of Texas, No. 24-00857.
