Zoom faces investor lawsuit for privacy and security breaches

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Confetti falls as Zoom founder Eric Yuan rings the Nasdaq opening bell on April 18, 2019 in New York.

Kena Betancur | Getty Images

Zoom was struck by a class action lawsuit brought by one of its shareholders, who alleged that the company had not disclosed any issues with the privacy and security of its video conferencing platform.

Reports say the lawsuit, which has been filed with the US District Court for the Northern District of California, said concerns over Zoom’s security and privacy breaches had affected its share price. Zoom stocks have declined in recent days, but are still up 67% since the start of the year.

Investors widely viewed the company as a sign of the growing demand for enterprise software in the midst of the coronavirus pandemic. Lockouts around the world have forced many employees to work from home in order to contain the virus.

Zoom shares fell almost 3% in long-time trading following the announcement of the class action. Zoom was not immediately available for comment when contacted by CNBC on Wednesday morning.

Zoom CEO Eric Yuan apologized for the debacle, admitting in a blog post last week that “We haven’t lived up to the expectations of the community – and ours – in terms of privacy and security “

The app has been banned by Elon Musk’s SpaceX and New York schools for the flaws, which have come under close scrutiny as the company grows in popularity. Zoom said it had reached 200 million daily users in March, more than the maximum of 10 million daily users it had attracted in December.

People have shared stories of “zoom bombing” attacks, where some meeting attendees divert a call to bomb others with toxic and sometimes pornographic content. The company encourages users to use features such as a waiting room, a meeting lock, and a screen sharing limit to avoid such attacks.

Zoom has also been criticized for sharing personal data with Facebook – even if they did not have a Facebook account – while the company also admitted that it had “mistakenly” routed certain calls across China as a backup to deal with network congestion. The company then made changes to its platform to resolve these issues.

In addition, New York State Attorney General Letitia James is reported to have asked the company to describe the changes it had made to handle the recent increase in traffic on its network, raising concerns about vulnerabilities such as the ability for hackers to access people’s webcams.

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