SolarWinds Face Class Action Shareholder Lawsuit Over Handling of Cyber Security Breach
According to a report from Fox Business, a shareholder has filed a class action lawsuit against SolarWinds—a large software company based in Austin, Texas. The company was recently the victim of a significant cyber security breach. The shareholder is taking legal action on the grounds the corporate executives violated federal law by misrepresenting and failing to disclose the extent of the hack. Here, our Miami shareholder & partnership dispute lawyers provide an overview of the class action lawsuit.
Cyber Security Breach Was Not Immediately Disclosed
Earlier this year, cyber hackers penetrated the servers of software company SolarWinds. In recent weeks, a lot more information has come out about the extent of the data breach. Though, there are still plenty of questions being raised about it and a more comprehensive investigation is still underway. Indeed, recent reports have come out suggesting that the hack may have been perpetrated by the Russian government or Russian-backed organizations.
For the purposes of the shareholder lawsuit, the class action claim was filed on behalf of investors who purchased shares of the company between February 2020 and December 2020 – those being the dates that the company is believed to have been made aware of the initial breach and the date when the information was publicly disclosed.
Notably, the SolarWinds software breach was very damaging to the company as it put the sensitive information of its customers at risk. The Texas-based software management company has many high value clients, including Microsoft, Cisco, and the federal government of the United States. The hack could undermine the value of the company going forward.
Shareholder Lawsuit: Breach of the Securities Exchange Act of 1934
The SolarWinds stock price dropped dramatically following the report disclosing the cyber security breach. Within hours, the value of the company dropped by nearly 50 percent. Of course, this represented sharp loss for many shareholders. The class action lawsuit alleges that corporate executives violated the Securities Exchange Act of 1934 by materially misrepresenting the nature of the hack and not disclosing the problem in a prompt manner.
Under federal securities law, corporate directors and officials have a legal responsibility to provide certain information to shareholders. In the SolarWinds case, the plaintiffs contend that executives possessed “actual knowledge” that false statements were being made and that they intentionally and/or recklessly deceive shareholders in order to further their own interests. In the lawsuit, shareholders are seeking compensation for actual financial losses as well as legal costs and attorneys’ fees.
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At Pike & Lustig, LLP, our Florida shareholder law attorneys find solutions where other people see problems. If you have any questions or concerns about your legal rights as a shareholder, our team is more than happy to help. Call us today to request your confidential initial consultation. We represent shareholders throughout all of South Florida, including in Hollywood, Pembroke Pines, Miami Beach, Weston, Delray Beach, Boynton Beach, Sunrise, and Fort Lauderdale.