CrowdStrike sued by investors over global IT outage

CrowdStrike, a cybersecurity firm, is facing a class action lawsuit from investors following a significant global IT outage caused by a faulty update to its Falcon platform. The incident, which occurred on July 19, 2024, resulted in a nearly 38% drop in CrowdStrike's stock price, from $343 to $214. Plaintiffs allege that the company misrepresented the reliability and thorough testing of its software, as the faulty update affected over 8.5 million Windows devices, leading to system crashes and extended outages for numerous organizations, including airports and hospitals.

The lawsuit, filed by the Plymouth County Retirement Association in Texas, claims that CrowdStrike's assurances about the quality of its products were misleading and that the company failed to disclose critical information regarding the risks associated with its updates. The financial repercussions of the outage are substantial, with estimates of losses to affected enterprises reaching $5.4 billion. Delta Airlines, one of the impacted companies, reported a loss of approximately $500 million due to flight cancellations resulting from the outage and has sought legal recourse against CrowdStrike and Microsoft.

The lawsuit cites violations of the Exchange Act and seeks compensatory damages for investors who suffered financial losses due to the incident. The fallout from the outage continues to affect CrowdStrike's reputation and operational trustworthiness in the cybersecurity market.