Zoom sued for overstating, not disclosing privacy, security flaws

Sharehold claims company failed to disclose that its service was not end-to-end encrypted

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

Continue Reading Below

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% at $113.75 on Tuesday. They have lost nearly a third of their market value since touching record highs in late-March.

TickerSecurityLastChangeChange %
ZMZOOM VIDEO COMMUNICATIONS INC.496.50+31.52+6.78%

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 UNDER FIRE FOR SECURITY VULNERABILITIES, TIES TO CHINA

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.

Eric Yuan, CEO of Zoom Video Communications poses for a photo after he took part in a bell ringing ceremony at the NASDAQ MarketSite in New York, April 18, 2019. (REUTERS/Carlo Allegri)

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

ZOOM CEO: VIRUS SECURITY CONCERNS SHOWED 'I REALLY MESSED UP'

Elon Musk's rocket company SpaceX recently banned its employees from using Zoom, citing "significant privacy and security concerns," while Taiwan's cabinet has told government agencies to stop using the app.

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

HOW TO HOST SECURE ZOOM MEETINGS WHILE WORKING FROM HOME

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

CLICK HERE TO READ MORE ON FOX BUSINESS

(Reporting by Maria Ponnezhath and Shubham Kalia in Bengaluru; Editing by Vinay Dwivedi)

GET FOX BUSINESS ON THE GO BY CLICKING HERE