CrowdStrike Sued by Shareholders Over Software Outage

CrowdStrike is being sued by its shareholders over the software outage that caused a July 19 global outage that crashed over 8 million computers worldwide.

The Guardian reports that a lawsuit was filed in an Austin, Texas, federal court by CrowdStrike’s shareholders. They claim that CrowdStrike misled investors by allowing them to believe their software was adequately tested and validated.

The lawsuit states, “Defendants had failed to disclose that: (1) CrowdStrike had instituted deficient controls in its procedure for updating Falcon and was not properly testing updates to Falcon before rolling them out to customers; (2) this inadequate software testing created a substantial risk that an update to Falcon could cause major outages for a significant number of the Company’s customers; and (3) such outages could pose, and in fact ultimately created, substantial reputational harm and legal risk to CrowdStrike.”

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 https://t.co/eaIBEsjzbP pic.twitter.com/CC6cSix5QM

— Reuters (@Reuters) August 1, 2024

After the outage, CrowdStrike’s stocks plummeted. Per Tech Central, CrowdStrike’s share price fell 32% after the outage, reducing its market value to shareholders.

Reuters reports that the outage, which was linked to CrowdStrike’s “Falcon Sensor” software, caused Microsoft Windows to crash. The update affected an estimated 8.5 million Windows devices, sending them offline.

Delta Air Lines was particularly hard hit, with thousands of flights grounded and some passengers waiting days for rebookings. Delta plans to sue Microsoft and CrowdStrike for damages. According to The Guardian, Ed Bastian, CEO of Delta Air Lines, says the airline is facing $500 million in costs.

Microsoft subsequently shared a statement regarding the update: “While software updates may occasionally cause disturbances, significant incidents like the CrowdStrike event are infrequent. We currently estimate that CrowdStrike’s update affected 8.5 million Windows devices, or less than one percent of all Windows machines. While the percentage was small, the broad economic and societal impacts reflect the use of CrowdStrike by enterprises that run many critical services.”

In regards to the shareholder lawsuit, a CrowdStrike spokesperson said, “We believe this case lacks merit and we will vigorously defend the company.”