CrowdStrike: Million-dollar deal triggers investigations by SEC and judiciary

Explosive headline from the US: CrowdStrike shares fell more than 4 percent today following reports that the cybersecurity company is under increased scrutiny by the US Department of Justice and the Securities and Exchange Commission (SEC) due to a multi-million dollar software deal with distributor Carahsoft. Investigators are said to be particularly interested in the role of the company's executives.

Specifically, the case concerns an order for cybersecurity software worth $32 million intended for the U.S. tax authority, the IRS, reports Bloomberg . According to CrowdStrike, Carahsoft paid on time. However, the agency neither ordered nor received the software. Why the two companies went through with the transaction without a valid order remains unclear.

There is suspicion of so-called “pre-booking”, i.e. prematurely booking sales in order to artificially improve the quarterly result.

According to Bloomberg , several employees raised concerns internally last year. Warnings were also apparently documented in official compliance questionnaires.

The investigations are now being conducted in parallel by the Department of Justice and the SEC. Particularly explosive is the fact that the authorities are apparently also interested in other deals, including those with the Department of Health and Human Services and the Department of Energy.

CrowdStrike officially maintains that the deal was conducted entirely correctly. In an analyst conference call in November 2023, CEO George Kurtz praised the deal as one of the major highlights in the government sector.