- By Ashish Singh
- Thu, 01 Aug 2024 07:40 PM (IST)
- Source:Reuters
Shareholders of CrowdStrike have filed a lawsuit, claiming the cybersecurity startup deceived them by failing to disclose the possibility that the July 19 worldwide outage that brought down over 8 million computers was caused by insufficient software testing.
Shareholders claimed they were informed that CrowdStrike's claims regarding its technology were materially false and misleading when a faulty software update caused disruptions to emergency lines, banks, airlines, and hospitals worldwide in a proposed class action filed on Tuesday night in a federal court in Austin, Texas.
They claimed that as the effects of the outage became known, Chief Executive George Kurtz was called to testify before the US Congress, and Delta Air Lines reportedly hired well-known attorney David Boies to pursue damages. CrowdStrike's share price fell 32% over the following 12 days, wiping out $25 billion of market value.
The complaint quotes remarks made by Kurtz on a conference call on March 5th, during which he described CrowdStrike's software as "validated, tested, and certified."
Austin-based CrowdStrike issued the following statement on Wednesday: "We believe this case lacks merit and we will vigorously defend the company." Additionally named as defendants are Kurtz and Chief Financial Officer Burt Podbere.
Holders of CrowdStrike Class A shares between November 29, 2023, and July 29, 2024, are seeking unspecified damages in a lawsuit brought by the Plymouth County Retirement Association of Plymouth, Massachusetts.
CrowdStrike may face additional lawsuits if their stock price falls due to unanticipated negative news.
The disruption cost Delta $500 million, according to CEO Ed Bastian, who spoke with CNBC on Wednesday. This amount included missed income, compensation, and lodging for stranded travellers.
Delta's CEO, Ed Bastian, estimated that the disruption cost the airline $500 million in lost revenue, compensation, and hotel expenses for stranded passengers.
On Wednesday, CrowdStrike shares closed at $231.96, down $1.69. They closed at $343.05 the day before the interruption.
The case is Plymouth County Retirement Association vs CrowdStrike Inc et al, U.S. District Court, Western District of Texas, No. 24-00857.