CrowdStrike shareholders have filed a proposed class action lawsuit against the cybersecurity company, alleging it defrauded them after a faulty software update caused a global IT outage.
CrowdStrike shareholders claim the cybersecurity company defrauded them after a faulty software update caused a global outage that crashed more than 8 million computers on July 19.
In a class action lawsuit filed Tuesday in Austin, Texas federal court, shareholders accused CrowdStrike of making materially false and misleading statements about its software testing. They say those false statements came to light during the outage, which disrupted airlines, banks, hospitals and emergency lines around the world.
They said CrowdStrike's share price fell 32% over the next 12 days, wiping out $25 billion of market value. As the outage's effects became known, Chief Executive George Kurtz was called to testify to the U.S. Congress, and Delta Air Lines reportedly hired prominent lawyer David Boies to seek damages.
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The complaint points to statements from Kurtz on a March 5 conference call, when the CEO assured investors that CrowdStrike's software was "validated, tested and certified."
CrowdStrike said the lawsuit "lacks merit" and promised to "vigorously defend the company" in a statement Wednesday. Kurtz and Chief Financial Officer Burt Podbere are also named as defendants.
Plaintiffs are the Plymouth County Retirement Association of Plymouth, Massachusetts. They seek unspecified damages for holders of CrowdStrike Class A shares between Nov. 29, 2023 and July 29, 2024.
CrowdStrike could face more lawsuits in the weeks and months to come.
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The Austin, Texas-based cybersecurity tech company said the July 19 incident started after it released a content configuration update for the Windows sensor to detect new potential threats.
However, there was a bug in its test software, which proceeded to shut down computers around the world, derailing airline operations and knocking banks, hospitals and other businesses offline.
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It took Delta Air Lines almost a week to get its operations in order because 60% of its "most critical applications that run the airline" are on Microsoft Windows. Delta CEO Ed Bastian told CNBC on Wednesday that the outage cost his airline $500 million in both lost revenue and compensation to customers whose flights were disrupted.
"We’re not looking to wipe them out, but we’re looking to make certain that we get compensated however they decide to for what they cost us," Bastian said.
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Kurtz apologized to customers affected, saying that the company won't rest until it achieves "full recovery."
"At CrowdStrike, our mission is to earn your trust by safeguarding your operations. I am deeply sorry for the disruption this outage has caused and personally apologize to everyone impacted," he wrote. "While I can’t promise perfection, I can promise a response that is focused, effective, and with a sense of urgency."
FOX Business' Aislinn Murphy and Reuters contributed to this update.
