Shareholders sue CrowdStrike over major software outage

Cybersecurity firm CrowdStrike is mired in a lawsuit as shareholders allege that the company deceived them by concealing critical information about its software testing, resulting in a global outage on July 19, reports Reuters. The outage affected over 8 million computers and disrupted operations for airlines, banks, hospitals, and emergency services worldwide. Filed on Tuesday in the federal court of Austin, Texas, the proposed class action claims that CrowdStrike's assurances regarding its technology were misleading and false.

In the wake of the flawed software update, CrowdStrike's share price plummeted by 32% over a span of 12 days, erasing approximately $25 billion in market value. The repercussions of the outage included CEO George Kurtz being summoned to testify before the U.S. Congress, and Delta Air Lines reportedly hiring well-known attorney David Boies to pursue compensation for damages.

The complaint mentioned instances such as a March 5 conference call, during which CEO Kurtz portrayed CrowdStrike's software as "validated, tested, and certified." The plaintiffs argue that these statements proved to be materially inaccurate.

Responding to the lawsuit on Wednesday, Austin-based CrowdStrike defended itself, stating, "We believe this case lacks merit, and we will vigorously defend the company." CrowdStrike's Chief Executive George Kurtz and Chief Financial Officer Burt Podbere are also named as defendants in the suit.

Led by the Plymouth County Retirement Association of Massachusetts, the lawsuit seeks unspecified damages for holders of CrowdStrike Class A shares between November 29, 2023, and July 29, 2024. Shareholders commonly initiate such lawsuits when unexpected adverse events result in significant drops in stock prices. As a result, CrowdStrike may face additional legal actions.

During an interview with CNBC on Wednesday, Delta CEO Ed Bastian disclosed that the outage cost the airline a staggering $500 million in lost revenue, compensation to affected customers, and arrangements for stranded passengers.

CrowdStrike shares concluded Wednesday's trading at $231.96, down by $1.69. Prior to the outage, the shares closed at $343.05.

The legal case is titled Plymouth County Retirement Association v CrowdStrike Inc et al and is under the jurisdiction of the U.S. District Court, Western District of Texas. The case number is 24-00857.

Earlier SSP reported that Meta will let users to create custom AI characters.