CrowdStrike Faces Class Action Lawsuit Over Outage, Shareholders Allege Fraud

Cybersecurity firm CrowdStrike is embroiled in a class action lawsuit filed by shareholders who claim the company misrepresented the robustness of its software testing. This alleged oversight led to a catastrophic global outage on 19 July, impacting over eight million computers. 

The lawsuit, lodged in the federal court in Austin, Texas, contends that CrowdStrike's reassurances about its technology's reliability were false and misleading, revealed only when a faulty software update caused widespread disruptions.

The plaintiffs, led by the Plymouth County Retirement Association of Plymouth, Massachusetts, assert that the company's stock price plunged 32 per cent over the subsequent 12 days, erasing USD 25 billion in market value. This decline followed revelations of the outage's extensive fallout, which affected major sectors including airlines, banks, hospitals and emergency services. 

The situation had intensified as CrowdStrike's Chief Executive George Kurtz was called to testify before the US Congress. In an important development, Delta Air Lines, one of the affected parties, reportedly retained renowned lawyer David Boies to seek damages, with Delta's CEO Ed Bastian estimating the airline's losses at USD 500 million due to the incident.

The lawsuit references statements from a 5 March conference call where Kurtz described CrowdStrike's software as "validated, tested and certified." In response to the lawsuit, Austin-based CrowdStrike asserted that the case lacks merit and pledged a vigorous defense. Kurtz and Chief Financial Officer Burt Podbere are named as defendants in the lawsuit, which seeks unspecified damages for holders of CrowdStrike Class A shares between 29 November 2023 and 29 July 2024.