CrowdStrike Hit by Class Action Lawsuit from Shareholders Over Massive Outage

CrowdStrike, a prominent cybersecurity company, is facing a class action lawsuit from its shareholders following a massive global outage on July 19 that affected over eight million computers. The shareholders accuse CrowdStrike of concealing inadequate software testing, which led to the outage and resulted in significant financial losses.

The lawsuit was filed on Tuesday night in the Austin, Texas, federal court by the Plymouth County Retirement Association of Plymouth, Mass. The shareholders allege that CrowdStrike's assurances about the reliability of its technology were materially false and misleading. The flawed software update disrupted critical services worldwide, including airlines, banks, hospitals, and emergency lines.

Following the outage, CrowdStrike's share price plummeted 32 percent over 12 days, erasing $25 billion of market value. As the impact of the outage became apparent, CrowdStrike's CEO George Kurtz was called to testify before the U.S. Congress. Additionally, Delta Air Lines hired prominent lawyer David Boies to seek damages, citing a $500 million loss due to the outage, including lost revenue and compensation for stranded passengers.

The complaint references statements from a March 5 conference call where Kurtz described CrowdStrike's software as "validated, tested, and certified." The lawsuit names both Kurtz and CFO Burt Podbere as defendants.

A CrowdStrike spokesperson responded on Wednesday, stating, "We believe this case lacks merit and we will vigorously defend the company." The class action seeks unspecified damages for holders of CrowdStrike Class A shares between November 29, 2023, and July 29, 2024.

This lawsuit could be the first of many, as shareholders often pursue legal action after unexpected negative events cause stock prices to fall. CrowdStrike shares, which closed at $231.96 on Wednesday, had previously closed at $343.05 the day before the outage.