(Reuters) — CrowdStrike has been sued by shareholders who said the cybersecurity company defrauded them by concealing how its inadequate software testing could cause the July 19 global outage that crashed 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 when a flawed software update 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, CEO George Kurtz was called to testify before Congress, and Delta Air Lines reportedly hired prominent lawyer David Boies to seek damages.
The complaint cites statements including from a March 5 conference call in which Mr. Kurtz characterized CrowdStrike’s software as “validated, tested and certified.”
In a statement Wednesday, Austin-based CrowdStrike said: “We believe this case lacks merit and we will vigorously defend the company.”
Mr. Kurtz and Chief Financial Officer Burt Podbere are also defendants.
The lawsuit, led 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.
Delta CEO Ed Bastian told CNBC Wednesday that the outage cost his airline $500 million, including lost revenue and compensation and hotels for stranded fliers.
CrowdStrike shares closed Wednesday down $1.69 at $231.96. They closed at $343.05 on the day before the outage.
The case is Plymouth County Retirement Association v CrowdStrike Inc. et al.
