Business

Shareholder sues Zoom for not disclosing security flaws

Zoom Video Communications Inc. was slapped with a class-action suit yesterday by one of its shareholders accusing the videoconferencing app of overstating its privacy standards and failing to disclose that its service was not end-to-end encrypted.

Shares down nearly a third of their value since hitting record highs in late March

Videoconferencing company Zoom is being sued by a shareholder who claimed in a court filing that a string of recent media reports highlighting the privacy flaws in Zoom's software have led the company's stock to plummet. (Dado Ruvic/Illustration/Reuters)

Zoom Video Communications Inc. was slapped with a class-action suit by one of its shareholders on Tuesday accusing the videoconferencing app of overstating its privacy standards and failing to disclose that its service was not end-to-end encrypted.

Shareholder Michael Drieu claimed in a court filing that a string of recent media reports highlighting the privacy flaws in Zoom's application have led to the company's stock, which had rallied for several days in the beginning of the year, to plummet.

The company's shares closed down about 7.5 per cent at $113.75 US on Tuesday. They have lost nearly one-third of their market value since touching record highs in late-March.

Zoom chief executive officer Eric Yuan last week apologized to users, saying the company had fallen short of the community's privacy and security expectations and was taking steps to fix the issues. 

Zoom has been trying to plug security issues as it signs up millions of new users from across the world as people are forced to work from home after lockdowns were enforced to slow the spread of the coronavirus.

However, the company is facing a backlash from users worried about the lack of end-to-end encryption of meeting sessions and "Zoom-bombing," where uninvited guests crash into meetings.

Elon Musk's rocket company SpaceX recently banned its employees from using Zoom, citing "significant privacy and security concerns." 

Zoom did not respond to a Reuters request for comment, after market hours.

The case number is 5:20-cv-02353 and it was filed in the U.S. District Court for the Northern District of California.

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