CrowdStrike Shareholders Sue After Global Computer Outage Leads to Billions in Losses

Ryan J. Farrick — August 1, 2024

Upclose shot of computer screen with the word “Security” and a hand-shaped cursor; image by Pixabay, via Pexels.com.

Many Fortune 500 companies use CrowdStrike products to detect and defeat “hacking threats,” but a mid-July update to CrowdStrike’s signature Falcon software was released with “problematic content data” incompatible with Windows, which caused up to 8.5 million computers to crash.

CrowdStrike shareholders have filed a lawsuit against the cybersecurity company, which is believed responsible for a massive, global computer outage that affected millions of users and caused losses totaling in the tens of billions of dollars.

According to The Guardian, the class-action claim was filed on behalf of the Texas Plymouth County Retirement Association. In their complaint, attorneys for the Texas-based pension fund say that CrowdStrike misled its investors by saying that its technologies were “validated, tested, and certified.”

A recent report from CNN notes that “numerous Fortune 500 companies” use CrowdStrike products to detect and defeat “hacking threats.” But a mid-July update to CrowdStrike’s signature Falcon software was released with “problematic content data” incompatible with Windows, which caused up to 8.5 million computers to crash.

“Defendants had failed to disclose that: (1) CrowdStrike had instituted deficient controls in its procedure for updating 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,” attorneys wrote.

A laptop. Image via Pixnio. Listed as Public Domain by Pixnio. (source:https://pixnio.com/objects/computer/laptop-keyboard-device-laptop-computer-technology-business-office-internet-equipment).

CrowdStrike’s allegedly false claims about the integrity of its technologies led to stock trading “at artificially high prices,” with the value of shares plummeting in the aftermath of the July outage.

A CrowdStrike spokesperson has since said that “this case lacks merit,” and that the company will “vigorously defend” itself against all allegations.

In the meantime, many corporations are still trying to assess the damage caused by Falcon’s failure—with some publicly signaling plans to file their own claims against CrowdStrike.

Ed Bastian, the chief executive of Delta Air Lines, said that the outage forced the carrier to cancel more than 5,000 flights, culminating in an estimated loss of about $500 million.

“If you’re going to be having access—priority access to the Delta ecosystem, in terms of technology—you’ve got to test the stuff,” Bastian said. “You can’t come into a mission-critical 24/7 operation and tell us, ‘We have a bug.’”

“We have to protect our shareholders,” Bastian said. “We have to protect our customers, our employees, for the damage, not just to the cost of it, but [the damage to] the brand, the reputational damage.”

Earlier this week, Bastian said that Delta is actively preparing for litigation.

“We have no choice,” he said. “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. Half a billion dollars in five days.”