CrowdStrike faces shareholder lawsuit over global outage caused by faulty software update

CrowdStrike, a leading cybersecurity firm, is facing a class action lawsuit filed by shareholders who allege the company misled investors about the reliability of its software, resulting in a massive global outage on July 19th that impacted millions of computers worldwide.

The lawsuit, filed in a Texas federal court, claims that CrowdStrike made false and misleading statements about its technology, concealing the potential for disruptions caused by inadequate software testing.

The outage, triggered by a flawed software update to CrowdStrike's popular "Falcon Sensor," caused widespread chaos, bringing airlines, banks, hospitals, and even emergency lines to a standstill.

"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 DAL.N reportedly hired prominent lawyer David Boies to seek damages," the lawsuit alleges.

The July 19th Outage: A Recap

The global tech failure, as reported by Reuters on July 19th, had a far-reaching impact:

What Happened? CrowdStrike's Falcon Sensor software, a widely used endpoint detection and response (EDR) product, caused Microsoft Windows systems to crash, displaying the infamous "Blue Screen of Death."

Why Did It Happen? A faulty software update was identified as the root cause.

Who Was Impacted? The outage affected operations across multiple industries globally, including airlines, airports, media outlets, banks, healthcare systems, and even government agencies in several countries, including India.

Shareholder Claims

The shareholders filing the lawsuit argue that CrowdStrike's reassurances about its technology's reliability proved to be materially false and misleading, causing significant financial losses for investors. They point to the sharp decline in CrowdStrike's stock price following the outage as evidence of the company's alleged deception.

CrowdStrike has yet to respond to the lawsuit.