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CrowdStrike has been sued by shareholders who say the cybersecurity company defrauded them by concealing how its flawed software testing caused the July 19 global outage that locked up more than 8 million computers.
In a proposed class action filed Tuesday night in federal court in Austin, Texas, shareholders said they learned that CrowdStrike’s assurances about its technology were materially false and misleading after a flawed software update disrupted airlines, banks, hospitals and emergency hotlines around the world.
They said CrowdStrike’s stock price fell 32% over the next 12 days, wiping out $25 billion in market value, as the effects of the outage became known. Chief Executive George Kurtz was called to testify before the U.S. Congress, and Delta Air Lines reportedly hired prominent attorney David Boies to sue for damages.
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The complaint cites statements from, among other things, a March 5 conference call in which Kurtz described CrowdStrike’s software as “validated, tested and certified.”
In a statement on Wednesday, Austin-based CrowdStrike said, “We believe this case has no merit and we will vigorously defend the company,” Kurtz and Chief Financial Officer Burt Podbere are also defendants.
The lawsuit, filed by the Plymouth County Retirement Association of Plymouth, Massachusetts, seeks unspecified damages for holders of CrowdStrike Class A shares between Nov. 29, 2023 and July 29, 2024.
Shareholders often sue companies after unexpected negative news causes stock prices to plummet. CrowdStrike could face more lawsuits.
Delta CEO Ed Bastian told CNBC on Wednesday that the outage cost his airline $500 million, including lost revenue, compensation and hotels for stranded passengers.
CrowdStrike shares closed down $1.69 on Wednesday at $231.96. The day before the outage, they closed at $343.05.
