(Bloomberg) — US prosecutors and regulators are investigating a $32 million deal between CrowdStrike Holdings Inc. and a technology distributor to provide cybersecurity tools to the Internal Revenue Service, according to two people familiar with the matter and a document seen by Bloomberg News. Investigators for the Justice Department and the Securities and Exchange Commission have been interviewing people and collecting records related to the deal, according to the document and people. They spoke on condition of anonymity because they are not authorized to discuss the matter. Carahsoft Technology Corp. paid CrowdStrike for the deal that the cybersecurity firm closed on the last day of a fiscal quarter in 2023, but the IRS never purchased the products, Bloomberg first reported in October. The transaction under investigation was big enough that it could have made the difference between CrowdStrike beating or missing Wall Street projections for the period, although the Austin, Texas-based company has declined to detail how it accounted for the deal. The day after CrowdStrike reported results for the record quarter, its shares rose 10%. The parallel probes, which haven’t been previously reported, also represent additional scrutiny of Carahsoft, a dominant reseller of technology to the US government. The FBI searched the firm’s headquarters last year, and federal prosecutors are conducting a separate civil investigation of whether the company conspired with another technology firm to overcharge the government. CrowdStrike spokesperson Brian Merrill said in an email, “we stand by the accounting of the transaction.” A lawyer for Carahsoft, Samarth Barot, declined to comment. A spokesperson for the US Attorney’s Office for the Southern District of New York, Nicholas Biase, declined to comment. An SEC spokesperson, Cory Jarvis, said the agency doesn’t comment on “the existence or nonexistence of a possible investigation.” As early as last fall, SEC and DOJ investigators were questioning former CrowdStrike employees involved in the deal, as well as IRS staff, and they’ve continued to pursue interviews in recent weeks, according to the people and document. They’ve also collected records related to the deal, including written communications from employees of the IRS, CrowdStrike and Carahsoft. The investigators asked witnesses detailed questions about the interactions between CrowdStrike sales staff and IRS officials in the lead up to the deal’s closure, one of the people said. They’ve inquired repeatedly whether the agency purchased the CrowdStrike software and were told no, the person said. IRS officials did not respond to calls and emails seeking comment. Prosecutors from the US Attorney’s Office for the Southern District of New York are among those working on the investigation, according to the person. The deal under scrutiny is complex and some specifics of it remain unclear. Documents from Carahsoft and CrowdStrike
The Department of Justice and the Securities and Exchange Commission are looking into a $32 million agreement between CrowdStrike and Carahsoft.
