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Rackspace Hosted Exchange failure due to 'ransomware incident'; company faces class-action lawsuit

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It was unclear whether a ransom was paid to the unknown attacker. It was still unclear how the Hosted Exchange system was breached.

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Rackspace Technology Inc. announced Tuesday that the “security incident” that led to an ongoing five-day major failure of its Hosted Exchange service was the result of a “ransomware incident.” Also, a class action lawsuit was filed against the company over the failure.

Hosted Exchange, which supports customer emails, has been down since Friday morning. According to a note on the company’s status page, thousands of customers and tens of thousands of users have been affected. The company is offering customers Microsoft 365 services at no cost and helping them migrate to the new platform.

It was unclear whether a ransom was paid to the unknown attacker. A Rackspace representative did not respond to TPR's request for comment on the incident.

A Rackspace statement said the company had employed a “leading cyber defense firm” to investigate the attack, and that it was too early to say whether any customer data had been compromised.

The class-action lawsuit was filed in the Western District of Texas by Garrett Stephenson and Gateway Recruiting, LLC. The lawsuit requested relief for negligence, breach of confidence, breach of implied contract, breach of the implied covenant of good faith and fair dealing, and deceptive trade practices.

Stephenson is the founder and CEO of Gateway Recruiting, an executive recruiting company.

The plaintiffs said Rackspace failed to secure personally identifiable and other confidential information and failed to notify customers of the Hosted Exchange failure in a timely manner. The lawsuit demanded a jury trial.

A Rackspace representative said the company would not comment on pending litigation.

A company statement said it did not believe any other Rackspace platforms or services had been affected. It explained that it was adding precautionary security measures but did not specify how it was protecting its systems.

It was still unclear how Rackspace’s Hosted Exchange system was breached.

The company’s stock price continued to drop since the Hosted Exchange failure and is down nearly 15% in the past five days.

Copyright 2022 Texas Public Radio. To see more, visit Texas Public Radio.

Josh Peck