Malicious actors trying to exploit global tech outage for their own gain

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As the world continues to recover from massive business and travel disruptions caused by a faulty software update from cybersecurity firm CrowdStrike, malicious actors are trying to exploit the situation for their own gain.

Government cybersecurity agencies across the globe and CrowdStrike CEO George Kurtz are warning businesses and individuals about new phishing schemes that involve malicious actors posing as CrowdStrike employees or other tech specialists offering to assist those recovering from the outage.

“We know that adversaries and bad actors will try to exploit events like this,” Kurtz said in a statement. “I encourage everyone to remain vigilant and ensure that you’re engaging with official CrowdStrike representatives.”

The UK Cyber Security Center said they have noticed an increase in phishing attempts around this event.

Microsoft said 8.5 million devices running its Windows operating system were affected by the faulty cybersecurity update Friday that led to worldwide disruptions. That’s less than 1% of all Windows-based machines, Microsoft cybersecurity executive David Weston said in a blog post on Saturday.

He also said such a significant disturbance is rare but “demonstrates the interconnected nature of our broad ecosystem.”

What’s happening with air travel?

With their tightly timed, interwoven schedules and complex technology systems, many big airlines struggle to stay on time when everything goes well. It perhaps was not surprising that the industry was among the hardest hit by the outage, with crews and planes caught out of position.

By mid-afternoon Saturday on the U.S. East Coast, airlines around the world had canceled more than 2,000 flights, according to tracking service FlightAware. That was down from 5,100-plus cancellations on Friday.

About 1,600 of Saturday’s canceled flights occurred in the United States, where carriers scrambled to get planes and crews back into position after massive disruptions the day before. According to travel data provider Cirium, U.S. carriers canceled about 3.5% of their scheduled flights for Saturday. Only Australia was hit harder.

Canceled flights were running at about 1% in the United Kingdom, France and Brazil and about 2% in Canada, Italy and India among major air-travel markets.

Robert Mann, a former airline executive and now a consultant in the New York area, said it was unclear exactly why U.S. airlines were suffering disproportionate cancellations, but possible causes include a greater degree of outsourcing of technology and more exposure to Microsoft operating systems that received the faulty upgrade from CrowdStrike.Story Continues

Activist Starboard took a stake in Match. Here are steps the investor may take to help lift shares

PUBLISHED SAT, JUL 20 20249:06 AM EDT

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Kenneth Squire@13DMONITOR

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The Match dating application is displayed on an Apple iPhone in an arranged photograph.

The Match dating application is displayed on an Apple iPhone.

Andrew Harrer | Bloomberg | Getty Images

Company: Match Group (MTCH)

Business: Match Group provides dating products worldwide. The company’s portfolio of brands includes Tinder, Match, The League, Meetic, OkCupid, Hinge and PlentyOfFish. Match’s services are available in over 40 languages to users all over the world.

Stock Market Value: $9.21B ($34.67 per share)

Activist: Starboard Value

Percentage Ownership: 6.64%

Average Cost: $33.55

Activist Commentary: Starboard is a very successful activist investor and has extensive experience helping companies focus on operational efficiency and margin improvement. Starboard has taken a total of 151 activist campaigns in its history and has an average return of 25.46% versus 13.61% for the Russell 2000 over the same period. In 46 of these situations, Starboard had an operational thesis as part of its activist campaign, and the firm made an average return of 43.89% versus 15.83% for the Russell 2000 over the same period.

What’s happening

On July 15, Starboard sent a letter to Match highlighting various opportunities to improve operations, financial results and capital allocation. This includes optimizing Tinder through product innovation, cutting costs and improving margins, as well as implementing an aggressive and systematic capital return program. Another possibility is to take the company private.

Match Group is by far the global leader in online dating apps with over 45 brands, the most notable of which are Tinder and Hinge. Tinder is the most downloaded dating app in the world. It accounted for over 55% of the company’s revenue at approximately $1.9 billion in 2023, has nearly 10 million paying users and over 50% earnings before interest, taxes, depreciation, and amortization margins. Hinge accounted for $400 million of the company’s revenue and has been growing at over 100% per year. This is a market-leading company with powerful network effects, significant revenue growth (from $2 billion in 2019 to an expected $3.6 billion this year), and an asset-light operating model, generating revenue through subscriptions. However, its stock price performance compared to peers and the broader market has been abysmal, with the stock down nearly 70% since the company’s separation from IAC in July 2020. In addition, Match trades at 8.3-times price/CY24E free-cash-flow multiple compared to a median 14.7-times for moderate growth, high recurring revenue technology companies

While Starboard’s engagement at Match has been reported by mainstream media as a “sell the company” campaign, it is much more thoughtful and complex than that. It’s more of an operational engagement, at least as Plan A. The main issue here is that revenue growth has slowed from 20% to an expected 5.7% in 2024, but the company has continually increased spending to try and chase its former high-growth profile. Starboard points out that there is nothing wrong with spending if executed well, but the money spent on customer acquisition and product development has simply not materialized in improved growth at Match. But Starboard thinks that this management team can get revenue growth back to double digits through innovation and that CEO Bernard Kim’s experience in the gaming industry and as interim CEO of Tinder could lead to meaningful product improvements. If management is unable to increase growth back to double digits, it will have to take a hard look at its expenses and focus on margin improvement. Match’s EBITDA margin of 36% may be high for an average company, but it’s low for a company like Match. But what is even more telling is that Match’s 2019-2024 cumulative incremental adjusted EBITDA margin is 33.5%, which is less than its actual adjusted EBITDA margin in every year during that time period (35.5% – 38%), showing that the company is spending way too much for the level of revenue growth it is getting. Starboard finds this unacceptable and points out that almost every company, especially internet companies, should have significant operating leverage evidenced by incremental margins that are substantially higher than consolidated margins. The firm expects that incremental margins for Match could be as high as 50% and consolidated adjusted operating margins could be above 40%, a target the company has itself referenced.

In addition, Starboard is urging management to repurchase shares. While financial activism like a share buyback is not a well-received strategy on its own, it is regularly used to create shareholder value in conjunction with a more complex operational plan like Starboard offers here. Starboard thinks that there is no better use of cash for the company than to buy back stock at the price it is trading now, ahead of any operational improvements that could lift the share price. Match does not necessarily disagree, as it has already committed to using 75% of free cash flow for share repurchases this year. Starboard would like the company to use the $900 million of available capacity under its net leverage target in addition to the 75% of free cash flow to buy back shares. Between a reduced share count and operational improvements, the firm thinks Match can generate $5.50 or more of free cash flow per share in 2026.

If management cannot create shareholder value through increasing revenue growth, and they fail to rein in costs and improve operating margins, Starboard thinks they must keep an open mind and fully understand the potential value creation opportunity available through a sale of the company and compare the alternatives on a risk-adjusted basis. Starboard thinks that this is a highly valuable asset that may be well-suited to operate as a private company.

Starboard often does its best activism from a board level and we would expect to see the firm looking for a seat here. While Match’s director nomination window does not open until Feb. 21, 2025, don’t let that fool you. Starboard will likely be talking to the company about a board seat well before then and could get invited on to the board sooner. While activists like Starboard’s Jeff Smith are often feared by boards, it has been our experience that when boards get to know him, they see how constructive he can be and grow to respect him. That is relevant here because the chairman of Match’s board since May 2021, Thomas McInerney, was a director and CEO of Altaba (the successor company to Yahoo) during the period from April 2016 to June 2017 when Smith served on the Yahoo board. If this does not settle quickly and amicably, Starboard will have seven months to weigh its next move, allowing the activist to observe the company’s operating performance in the back half of 2024 before it makes a decision.

Starboard is not the first activist to launch a public campaign at Match. Since the beginning of the year, the company has also attracted the attention of Elliott Management and Anson Funds. This is something you rarely saw 10 to 15 years ago, but it has become quite frequent today – multiple activists launching campaigns at the same company. The positives to this are that it is a very strong indication that the company is undervalued and there is a path to fix this undervaluation. It may also indicate a higher likelihood of some activist success. The negative is that it gives the company the ability to choose which activist it will work with and makes it much harder for one of the other activists to get any traction. Further, often management will choose the one looking for the least change. In this case, Match has already settled with Elliott for two board seats and might use that as a reason not to appoint any other shareholder representatives to the board. But we do not see that as a major obstacle for Starboard due to the firm’s experience, the tenor of the campaign so far and the fact that Match did not previously appoint an Elliott executive to the board.

Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.

Williams to Start Building Louisiana Energy Gateway Project

  • Pre-construction on natural gas pipeline could start next week
  • Energy Transfer says ‘surprising’ move given legal battles

By Elizabeth Elkin

July 19, 2024 at 3:18 PM PDT

Updated on 

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Williams Cos. will start building its delayed Louisiana Energy Gateway natural gas pipeline in the coming weeks, the company reported.

Pre-construction will begin as early as July 25, Williams said Friday in a letter to the Federal Energy Regulatory Commission.

The LEG project, which will move gas from the Haynesville Shale basin to the Gulf Coast, has been delayed amid legal battles with competitor Energy Transfer LP. Williams said in a statement that construction would already be “well underway” if not for the lawsuits.

A spokesperson for Energy Transfer said it’s “surprising” that Williams would start construction given ongoing regulatory and legal proceedings revolving around the project.

“None of the state court cases between LEG and Energy Transfer are final,” Vicki Granado, vice president of public relations and corporate communications for Energy Transfer, said in an email.

Read more: Williams Can Cross Path of Energy Transfer Line, Court Rules

Energy Transfer owns a key stretch of lines across East Texas and Louisiana and is seeking to expand its Gulf Run system amid booming demand for gas along Louisiana’s coast, where the fuel is chilled to a liquid for export.

(Updates with Energy Transfer comment from fourth paragraphs)

MPs given panic alarms amid rising threats

‘Welcome packs’ for new MPs will feature devices with GPS trackers that can alert police in an emergency

Liz Perkins21 July 2024 • 6:04am

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Sir Lindsay Hoyle, the Speaker, said he has "never seen anything as bad" as the present threat level
Sir Lindsay Hoyle, the Speaker, said he has “never seen anything as bad” as the present threat level CREDIT: UK PARLIAMENT

New MPs in Westminster have been given a panic alarm as security measures are beefed up following rising threats.

They have been added into the Commons “welcome packs” for the first time as politicians face death threats.

The move has been reported in the wake of former US President Donald Trump being attacked.

One veteran MP, in an interview with the Mail on Sunday, said: “There is an assumption that there’s a level of risk for all parliamentarians that never existed before.”

Police can alert a rapid response unit when the alarms are activated as they have GPS trackers.

MPs have previously been able to access the devices on request following the death of Labour MP Jo Cox in 2016.

But the panic alarms have now been given out automatically to the 335 new MPs.

The devices have been available to MPs since the death of Jo Cox in 2016
The devices have been available to MPs since the death of Jo Cox in 2016 CREDIT: PA

Labour MP Naz Shah said: “Never before did I think I would be physically attacked like I did on this campaign.

“It was pure hooliganism. They were young angry men.”

Last year, the Home Office pledged a £31 million package of measures to tackle the threat to MPs’ security.

Commons Speaker Sir Lindsay Hoyle this month said he has “never seen anything as bad” as the present threat level.

“If there’s something that keeps me awake at night, it is the safety of MPs,” he added.

On being given their alarm, one new MP said: “The Speaker is putting much more emphasis on MPs’ safety than ever before.”

The devices are said to have unique codes to help identify which MP has activated them.

They were given to MPs during induction sessions and demonstrations were staged on how to use the devices.

Get Ready to Pay More for Less-Reliable Electricity

As the grid becomes increasingly unstable due to age and extreme weather, utilities are ramping up spending on long-overdue maintenance and capital improvements

By Katherine BluntFollow | Photographs by Emily Elconin for WSJ

July 18, 2024 9:23 pm ETSAVESHARETEXT

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Americans used to spend little energy worrying about whether the lights would come on at the flick of a switch, or how much that electricity cost.

For a growing number of people, those days are over.

Larry Hilkene, who moved from Indiana to a quiet Detroit suburb just over a year ago, has since had nine power outages, the longest one lasting 16 hours. In the same period, his utility company, DTE Energy DTE -0.51%decrease; red down pointing triangle, raised electricity rates and sought regulatory approval for another increase as it works to improve the reliability of its system. 

Until recently, DTE used an antiquated tile map board to monitor its decades-old grid. When changes occurred on the system, an employee would use a 20-foot pole to place magnetic markers showing open and closed circuits. In 2022, DTE unveiled a massive digital display board to replace it, part of a major spending push to modernize the grid that will be shouldered, in large part, by customers.

Hilkene, who works in cybersecurity, wrote to regulators to express his opposition to paying more for what he considers subpar service. “I call it DT(non)E because they do not appear to be about energy,” he wrote, adding that he “cannot believe the abysmal state of power infrastructure here.”

Utility customers across the country are increasingly paying more for less-reliable service—a trend driven home by a massive heat wave that has triggered outages around the country in recent weeks.

Larry Hilkene has suffered through nine power outages since moving to a Detroit suburb just over a year ago.

Workers prepare to install a generator at Hilkene’s home.

Utilities from Michigan to New York and beyond are planning their largest capital investments since World War II as the grid becomes more unstable as a result of age and extreme weather. 

After Hurricane Beryl made landfall last week outside of Houston and pummeled the city as a tropical storm, more than 2.2 million of CenterPoint Energy’s 2.8 million Houston-area customers were without power, marking the company’s largest-ever outage. CenterPoint took days to assess the damage and estimated it would take 12 days to fully restore power. The company this year sought regulatory approval to raise rates, which have remained relatively flat for the past 10 years.

Meanwhile, demand is poised to soar, with millions of electric vehicles and massive data centers powering artificial intelligence needing to draw power.

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Customers of roughly 17 large utility companies may see rate hikes above the rate of inflation between 2022 and 2027, according to Sector & Sovereign Research. Utilities have generally kept rate increases at or below the rate of inflation to reduce the risk of pushback from regulators and customers.

Note: Measures exclude outages lasting 5 minutes or less

Source: U.S. Energy Information Administration

Utilities say significant spending is needed in part to address serious reliability issues. Between 2013 and 2022, the nation’s utility companies recorded a roughly 20% increase in outage frequency, according to the most recent federal data. Outage duration increased by more than 46% over the same period, largely as a result of weather-related disasters. 

During his first few power outages, Hilkene noticed something he hadn’t heard before in Indiana: the sound of his neighbors’ backup generators firing up. He surveyed the neighborhood, a community of three- and four- bedroom homes near a small lake and an equestrian center, to find that more than a quarter of them had installed natural gas-powered generators. 

On a recent spring day, a team of five men arrived with a trailer and unloaded a Kohler backup power unit to install on the lush lawn beside Hilkene’s house. The generator cost him about $12,000, a sum he considers substantial but worth it to avoid future outages.

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When a mid-June thunderstorm briefly knocked out the power, Hilkene said he sighed with relief as he heard the generator start up.

Days later, more than 25,000 people were without power in his county as more storms battered the Detroit area. 

Sharper rise

After years of relatively modest increases, U.S. electricity prices are on a sharper rise. Russia’s invasion of Ukraine in 2022 drove up the price of natural gas needed to fuel power plants. Gas prices have since receded, but rate increases are still accelerating as utilities invest tens of billions of dollars to stabilize the grid itself, and pass those costs onto customers.

Pedro Azagra, CEO of Avangrid, which operates utilities in New England and New York, said the company has substantially ramped up spending in recent years to address a range of reliability challenges.

“The problem that we have right now comes from decades of lack of investment,” he said. “You cannot catch up in one minute.”

U.S. electricity prices increased 4.4% over the past year, according to data from the Bureau of Labor Statistics, faster than the broader inflation rate of 3%. 

Hugh Wynne, Sector & Sovereign’s co-head of utilities research, said gas price volatility, combined with higher interest rates and higher costs associated with replacing old equipment, is beginning to put pressure on rates for utility customers in regions where a substantial amount of work has been proposed. Some utilities aren’t expected to seek major rate hikes in the coming years, but he said the firm is tracking an unusually high number that are. 

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Detroit’s power company is doing underground work to upgrade the outdated system of power lines and substations serving much of the downtown area.

“There were a lot of trends that were moving in a positive direction for the industry that are now going in the opposite direction,” he said.

Utilities are expected to invest more than $165 billion a year in 2024 and 2025 to make significant upgrades and replacements, according to trade group Edison Electric Institute, more than any year since the group began collecting data. Many utilities are also ramping up spending on routine activities such as maintenance and tree-trimming to reduce outages, and, throughout the West, wildfires caused by fallen power lines.

The need for work is spread throughout the country, with parts of the mid-Atlantic, the Midwest and California expected to see some of the steepest rate increases in coming years. Nationwide, large sections of the grid are decades old and need replacing, and labor and equipment have each become more expensive as a result of inflation and supply-chain snarls.

“Rates are going to go higher, and there’s not much you can do about it,” said Guggenheim analyst Shahriar Pourreza. “It’s kind of the new normal.” 

Tree problems

Avangrid subsidiary New York State Electric & Gas, which serves much of the rural upstate region, has for years delivered some of the state’s least-reliable power. NYSEG failed a state target for outage frequency for the fifth consecutive year in 2023, regulatory filings show, though the company improved that metric last year.

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Trees were the primary reason. Some grow more than a foot each year, increasing the likelihood of contact with power lines.

NYSEG told regulators that it has struggled to trim trees frequently enough to maintain safe distances between lines and branches. A 2022 regulatory filing showed that in large parts of the system, vegetation hadn’t been cut in at least six years, if ever.

NYSEG is now spending tens of millions of dollars to improve its tree work. That spending, combined with investments to upgrade outdated substations, circuit breakers and other equipment, is projected to drive power bills up by about 22% between 2023 and 2025. 

Avangrid’s Azagra said system reliability is faltering largely because of age, as well as more frequent storms and changing weather patterns that are stressing the trees and creating other hazards such as flooding.

National Grid linemen fix a power line during a snowstorm last year in Ballston Lake, N.Y. PHOTO: HANS PENNINK/ASSOCIATED PRESS

“If anyone says they don’t see that, come to me,” he said. “Come to upstate New York.”

In Oregon, Portland General Electric is investing heavily to upgrade the grid to withstand more extreme weather. The company has in recent years been working to reduce the risk of its power lines starting wildfires by burying certain circuits, trimming more trees and expanding its network of weather stations to monitor for risky conditions.

PGE is also preparing for an anticipated surge in demand to power new data centers and semiconductor manufacturing. The company last year significantly revised its expectations for industrial energy usage, telling regulators that come 2030, the need for additional power supplies could be more than 40% higher than earlier forecasts.

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CEO Maria Pope said many of the upgrades involve expanding system capacity to better distribute electricity supplies during periods of extreme demand, when power prices spike. The utility saw record summer power demand during a multiday heat wave last August. Eight months earlier, it saw all-time high winter power demand during an intense cold spell, breaking a record set about 25 years earlier.

PGE this year raised residential rates by about 17%. The company is seeking regulatory approval for another 7.2% increase next year.

Pope said the company needs to work with state and federal regulators to determine how to better manage costs and reduce the burden on customers as the utility completes the most substantial system overhaul in decades. She likened the spending need to the initial build-out of the electric system in the Pacific Northwest more than a century ago, a massive undertaking that involved the region’s utilities as well as the federal government and other investors.

“There’s no question that we need to accelerate the work that we’re doing,” she said. “We’re going to need to come up with creative solutions from a regulatory and probably also a legislative standpoint.”

Climate change

DTE, which serves Larry Hilkene and 2.3 million electric customers in southeastern Michigan, has one of the least reliable systems in the country, with customers experiencing some of the longest outages each year. Outages are substantially more frequent as well for many customers, though not throughout the entire system.

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Employees monitor information inside the DTE Energy Control Room in Detroit.

The company is planning to invest $9 billion over the next five years to reduce outage duration and frequency by 50% and 30%, respectively. By comparison, the company spent $5 billion over the past five years.

CEO Jerry Norcia said the breakdown in reliability—and the need to spend heavily to address it—is the result of more frequent and intense storms exacerbated by climate change, as well as historical inadequacies in some of the utility’s work programs. DTE for years failed to trim trees growing alongside its power lines at a frequency needed to avert major outage problems, particularly during severe wind and ice storms. 

Until about 2019, the company patrolled its lines for vegetation on a nine-year cycle, nearly twice the industry average of roughly five years, regulatory filings show. To achieve a five-year cycle, DTE is now spending hundreds of millions of dollars on what it calls a “tree-trimming surge” expected to last through 2025. The company has sought to reduce the burden on customers by issuing low-interest bonds to recover the costs over time.

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Norcia said the company’s previous tree-trimming standard was untenable, especially as storm patterns intensify. The company has in recent years seen an uptick in summer and winter storms, some of which have occurred back to back and left hundreds of thousands of people in the dark for days.

Until 2022, DTE used a magnetic tile map board to monitor the status of the power grid.

“I’m in a much different situation than my predecessors were,” Norcia said. “We have to accept this new reality that what used to happen every 50 years is now happening every three to five years.”

On top of that, Norcia said, the system serving much of downtown Detroit, designed nearly a century ago, needs near-complete replacement to support population growth, the adoption of electric vehicles and other power-demand drivers. The governor of Michigan has set a goal to have two million electric vehicles registered in the state by 2030, a milestone that would substantially increase electricity usage.

DTE has been working to automate and digitize parts of its system with technologies that many utilities have been using for years, including the digital display board installed in 2022. The company has been installing devices on power lines that detect disruptions and allow for remote operation.

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As part of a rate increase approved late last year, DTE’s average residential customers will pay nearly $100 more a year for electricity. The company this year sought permission for another increase that would add $135 to that total.

A row of homes in the New Center neighborhood of Downtown Detroit.

The company’s proposed spending could drive residential rates up roughly 12% above the rate of inflation between 2022 and 2027, according to Sector & Sovereign. Norcia said the company is working to keep rate increases below inflation, but he stressed that a massive amount of work is critical.

Detroit’s downtown network of poles and wires “will not be able to handle the weather we expect because it has weaker poles and older wires, and it can’t take the demand because the voltage isn’t high enough,” Norcia said. “It fundamentally has to be replaced.”

Write to Katherine Blunt at katherine.blunt@wsj.com

Copyright ©2024 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the July 19, 2024, print edition as ‘Get Ready to Pay More for Electricity’.

Outage for Microsoft Users Knocks Out Systems for Airlines and Hospitals in Chaotic Day

Companies across the world reported disruptions, citing technical issues from a cybersecurity software update.

July 19, 2024

Adam SatarianoDerrick Bryson TaylorRemy Tumin and Danielle Kaye

Here’s what to know about the outages.

A global technology outage, attributed to a glitch in a software update issued by the cybersecurity firm CrowdStrike, wreaked havoc on airlines, health care systems, banks and scores of other businesses and services around the world on Friday. The disruption, which reached what some experts called “historic” proportions, was a stunning example of the global economy’s fragile dependence on certain software, and the cascading effect it can have when things go wrong.

The software update resulted in crashes of machines running the Microsoft Windows operating system. George Kurtz, CrowdStrike’s chief executive, said it was not a security incident or a cyberattack. He said a fix had been sent out but warned that it could take some time to be put in place.

Global TechOutage

Outage for Microsoft Users Knocks Out Systems for Airlines and Hospitals in Chaotic Day

Companies across the world reported disruptions, citing technical issues from a cybersecurity software update.

July 19, 2024

    Scenes of the Disruption ›

    1. ChicagoBy Craig Hettich/ The New York Times
    2. [object Object]San FranciscoJim Wilson/The New York Times
    3. ManhattanOwen Davies for The New York Times
    4. MilwaukeeHiroko Masuike/The New York Times
    5. AtlantaBy The Associated Press
    6. MilwaukeeHiroko Masuike/The New York Times
    7. San FranciscoJim Wilson/The New York Times
    8. RomeGregorio Borgia/Associated Press
    9. AtlantaNicole Craine for The New York Times
    10. MadridReuters
    11. AtlantaNicole Craine for The New York Times
    12. QueensDakota Santiago for The New York Times
    13. San FranciscoJim Wilson/The New York Times
    14. BrooklynDave Sanders for The New York Times
    15. Eindhoven, the NetherlandsSQ Vision via Reuters
    16. Los AngelesStefanie Dazio/Associated Press
    17. BerlinChristoph Soeder/DPA, via Associated Press
    18. BangkokMailee Osten-Tan/Getty Images
    19. SeoulHannah Yi/The New York Times
    20. Kloten, SwitzerlandGaetan Bally/EPA, via Shutterstock

    Pinned

    Adam SatarianoDerrick Bryson TaylorRemy Tumin and Danielle Kaye

    Here’s what to know about the outages.

    A global technology outage, attributed to a glitch in a software update issued by the cybersecurity firm CrowdStrike, wreaked havoc on airlines, health care systems, banks and scores of other businesses and services around the world on Friday. The disruption, which reached what some experts called “historic” proportions, was a stunning example of the global economy’s fragile dependence on certain software, and the cascading effect it can have when things go wrong.

    The software update resulted in crashes of machines running the Microsoft Windows operating system. George Kurtz, CrowdStrike’s chief executive, said it was not a security incident or a cyberattack. He said a fix had been sent out but warned that it could take some time to be put in place.

    “We’re deeply sorry for the impact that we’ve caused,” Mr. Kurtz said on NBC’s “Today” show.

    CrowdStrike’s software is used by myriad industries around the world. Disruptions persisted throughout Friday as businesses manually updated their systems and airlines struggled to get crews and planes to where they were needed.

    Flights in the United States started taking off again by late morning, and crucial services, including emergency systems, were up and running. But progress was uneven as major companies, including banks and retailers, as well as health care systems struggled to get back online. Microsoft’s chief executive, Satya Nadella, said in a post on X that the company was working with CrowdStrike to help customers recover.

    Here’s how the spillover effects were felt all over the world:

    • Flights disrupted: U.S. airlines began restoring service on Friday after at least five of them — Allegiant Air, American, Delta, Spirit and United — had grounded all flights for a time, according to the Federal Aviation Administration. Travelers did not see immediate relief, however, even as flights took off, because of cascading delays at airports. By Friday afternoon, more than 2,000 flights across the country had been canceled, according to FlightAware, compared with about 900 on Thursday. But it was far from the country’s worst travel day of the year: Bad weather forced U.S. airlines to scrap more than 3,100 flights on Jan. 15.
    • Global reach: The issues were also felt at other airports around the world, including in Hong Kong; Sydney, Australia; Berlin; and Amsterdam. In Britain, check-in machines stopped working. The United Parcel Service and FedEx both reported disruptions, which could delay deliveries in the United States and Europe. Customers with TD Bank, one of the biggest banks in the United States, reported issues with accessing their online accounts, and several state and municipal court systems closed for the day because of the outage.
    • Emergency care: The outage destabilized health care systems across the globe, and hospitals canceled noncritical surgeries on Friday. Emergency response systems in the United States were also affected, and 911 lines were down in multiple states, the U.S. Emergency Alert System said on social media. Most, if not all, of the 911 problems appeared to have been resolved by midmorning. Kaiser Permanente, a medical system that provides care to 12.6 million members in the United States, said that all of its hospitals were affected, and it activated backup systems to keep caring for patients.
    • Federal response: President Biden was briefed on the CrowdStrike outage, White House officials said. Administration officials were “in touch with CrowdStrike and impacted entities” and “engaged across the interagency to get sector-by-sector updates.”
    • Largely unaffected systems: Some basic services, including major grocery store chains and public transit systems, appeared largely unaffected by the outages, at least in the United States. Amazon Web Services and Google Cloud, two of the major cloud-computing platforms alongside Microsoft Azure, said that by and large, their services were operating normally.

    Global TechOutage

    Outage for Microsoft Users Knocks Out Systems for Airlines and Hospitals in Chaotic Day

    Companies across the world reported disruptions, citing technical issues from a cybersecurity software update.

    July 19, 2024

    Scenes of the Disruption ›

    1. ChicagoBy Craig Hettich/ The New York Times
    2. [object Object]San FranciscoJim Wilson/The New York Times
    3. ManhattanOwen Davies for The New York Times
    4. MilwaukeeHiroko Masuike/The New York Times
    5. AtlantaBy The Associated Press
    6. MilwaukeeHiroko Masuike/The New York Times
    7. San FranciscoJim Wilson/The New York Times
    8. RomeGregorio Borgia/Associated Press
    9. AtlantaNicole Craine for The New York Times
    10. MadridReuters
    11. AtlantaNicole Craine for The New York Times
    12. QueensDakota Santiago for The New York Times
    13. San FranciscoJim Wilson/The New York Times
    14. BrooklynDave Sanders for The New York Times
    15. Eindhoven, the NetherlandsSQ Vision via Reuters
    16. Los AngelesStefanie Dazio/Associated Press
    17. BerlinChristoph Soeder/DPA, via Associated Press
    18. BangkokMailee Osten-Tan/Getty Images
    19. SeoulHannah Yi/The New York Times
    20. Kloten, SwitzerlandGaetan Bally/EPA, via Shutterstock

    Adam SatarianoDerrick Bryson TaylorRemy Tumin and Danielle Kaye

    Here’s what to know about the outages.

    A global technology outage, attributed to a glitch in a software update issued by the cybersecurity firm CrowdStrike, wreaked havoc on airlines, health care systems, banks and scores of other businesses and services around the world on Friday. The disruption, which reached what some experts called “historic” proportions, was a stunning example of the global economy’s fragile dependence on certain software, and the cascading effect it can have when things go wrong.

    The software update resulted in crashes of machines running the Microsoft Windows operating system. George Kurtz, CrowdStrike’s chief executive, said it was not a security incident or a cyberattack. He said a fix had been sent out but warned that it could take some time to be put in place.

    “We’re deeply sorry for the impact that we’ve caused,” Mr. Kurtz said on NBC’s “Today” show.

    CrowdStrike’s software is used by myriad industries around the world. Disruptions persisted throughout Friday as businesses manually updated their systems and airlines struggled to get crews and planes to where they were needed.

    Flights in the United States started taking off again by late morning, and crucial services, including emergency systems, were up and running. But progress was uneven as major companies, including banks and retailers, as well as health care systems struggled to get back online. Microsoft’s chief executive, Satya Nadella, said in a post on X that the company was working with CrowdStrike to help customers recover.

    Here’s how the spillover effects were felt all over the world:

    • Flights disrupted: U.S. airlines began restoring service on Friday after at least five of them — Allegiant Air, American, Delta, Spirit and United — had grounded all flights for a time, according to the Federal Aviation Administration. Travelers did not see immediate relief, however, even as flights took off, because of cascading delays at airports. By Friday afternoon, more than 2,000 flights across the country had been canceled, according to FlightAware, compared with about 900 on Thursday. But it was far from the country’s worst travel day of the year: Bad weather forced U.S. airlines to scrap more than 3,100 flights on Jan. 15.
    • Global reach: The issues were also felt at other airports around the world, including in Hong Kong; Sydney, Australia; Berlin; and Amsterdam. In Britain, check-in machines stopped working. The United Parcel Service and FedEx both reported disruptions, which could delay deliveries in the United States and Europe. Customers with TD Bank, one of the biggest banks in the United States, reported issues with accessing their online accounts, and several state and municipal court systems closed for the day because of the outage.
    • Emergency care: The outage destabilized health care systems across the globe, and hospitals canceled noncritical surgeries on Friday. Emergency response systems in the United States were also affected, and 911 lines were down in multiple states, the U.S. Emergency Alert System said on social media. Most, if not all, of the 911 problems appeared to have been resolved by midmorning. Kaiser Permanente, a medical system that provides care to 12.6 million members in the United States, said that all of its hospitals were affected, and it activated backup systems to keep caring for patients.
    • Federal response: President Biden was briefed on the CrowdStrike outage, White House officials said. Administration officials were “in touch with CrowdStrike and impacted entities” and “engaged across the interagency to get sector-by-sector updates.”
    • Largely unaffected systems: Some basic services, including major grocery store chains and public transit systems, appeared largely unaffected by the outages, at least in the United States. Amazon Web Services and Google Cloud, two of the major cloud-computing platforms alongside Microsoft Azure, said that by and large, their services were operating normally.

    July 19, 2024, 4:27 p.m. ETJuly 19, 2024July 19, 2024, 4:27 p.m. ET

    1. This outage was unique: It started with a software update sent to PCs from CrowdStrike, a cybersecurity firm used by many big companies.

    CrowdStrike Outage Cripples Flights, Banks, and Markets. Here’s the Latest.

    By George GloverFollow

    Updated July 20, 2024, 11:58 am EDT / Original July 19, 2024, 4:06 am EDT

    Microsoft service outages hit airlines, banks, and the London Stock Exchange on Friday. (DREAMSTIME)

    Mass IT outages grounded flights and disrupted stock exchanges on Friday as an overnight content update by cybersecurity company CrowdStrike 

    CRWD-11.10% crippled Microsoft’s PC operating systems.

    The number of people flagging problems with Microsoft’s 365 suite of apps and Azure cloud computing product spiked at about 1 a.m. Eastern time, according to data from Downdetector.com, a website that tracks service issues. Microsoft 

    MSFT-0.74% said later Friday that it had restored Azure.

    CrowdStrike confirmed that a content update it had implemented had caused the crashes, which have left some PC users facing a so-called Blue Screen of Death.

    “CrowdStrike is actively working with customers impacted by a defect found in a single update for Windows hosts,” a spokesperson for the company said in an emailed statement to Barron’s, adding that Friday’s outage wasn’t the result of a security incident or a cyberattack. Mac and Linux users haven’t been affected by the glitch.

    The company’s CEO George Kurtz apologized for the global tech outage in an interview with NBC, adding that while there has been “a fix deployed,” solving the problem “could take some time.”

    “Earlier today, a CrowdStrike update was responsible for bringing down a number of IT systems globally,” a Microsoft spokesperson said on Friday. “We are actively supporting customers to assist in their recovery.”

    CrowdStrike’s stock, which before Friday’s glitch was up 34% for the year, fell 11% to $303.72 by earlier afternoon. That put it on pace for its largest percentage decrease since Nov. 30, 2022, when it fell 15%. The stock was the worst performer in both the S&P 500 and the Nasdaq 1oo, though even with that decline, its 19% year-to-date gain beats a 15% surge in the S&P 500.

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    “This is as big of a negative IT event that we’ve seen globally in some time—if not ever,” Adam Borg, managing director for the investment bank Stifel, said in an interview. “Given the headline risk, the images we’re all seeing on TV, coupled with the really strong run in shares year to date and the premium valuation that the company has, it’s not surprising to see the stock trade off.”

    Questions may also be asked of Microsoft, which has spent more than 40 years building its reputation as a trusted manufacturer of PCs and software. There is no indication that it was at fault for Friday’s outage, but its shares still took a hit, falling 0.9% to $436.54.

    The tech meltdown “is not something that Microsoft can accept,” Gil Luria, a software analyst for the investment bank D.A. Davidson, told Barron’s. “They’ll have to go back and figure out how not to allow any other product that can connect to their platforms to cause this type of catastrophe. Even though the fault isn’t on them, there will be a cost and implications for them to prevent this from happening again.”

    Microsoft’s rival Apple 

    AAPL

    0.06% traded 0.2% higher, while the benchmark S&P 500ES00-0.02% and tech-heavy Nasdaq CompositeCOMP-0.81% stock market indexes fell 0.6% and 0.7%, respectively.

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    “We expect this outage to hurt the Big Tech companies who are also affected,” Kathleen Brooks, a research director at the online broker XTB, said. “It is hard to see risk managing to stage a meaningful recovery in Europe or the U.S. until this has been resolved.”

    Major U.S. airlines including AmericanDelta, and United halted flights on Friday due to the tech outage, while banks in Australia, South Africa, and the U.K. also were affected, according to reports.

    British TV channel Sky News was unable to broadcast live for a period on Friday morning, while the chaos delayed the opening of the London Stock Exchange by about 20 minutes and disrupted its news service.

    Write to George Glover at george.glover@dowjones.com

    UK seeks ‘regular’ EU meetings to rebuild post-Brexit relations

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    George Parker, Political EditorYESTERDAY 345 Print this page British and EU politicians and officials would regularly get back in the room together on a scale not seen since Brexit negotiations, under plans by Sir Keir Starmer’s government to reset relations. Nick Thomas-Symonds, Starmer’s EU ministerial envoy, said Britain wanted “structured dialogue to happen as soon as possible” to build closer ties on a wide range of issues including security, trade and migration. Thomas-Symonds confirmed that Britain was also seeking an UK-EU leaders’ summit to help seal the new partnership, saying both sides would be “laying some groundwork for this in the autumn”. In his first interview as EU relations minister, he said talks with Brussels would include efforts to dismantle Brexit trade barriers. “What business wants is fewer barriers to trade,” he told the Financial Times. Starmer this week hosted a European Political Community meeting of 44 European leaders — representing both EU and non-EU nations — at which the new prime minister vowed to move on from the trauma of Brexit. Since the UK’s departure from the bloc took effect in January 2020 official contacts between London and Brussels have withered — aside from official-level meetings to discuss aspects of the UK-EU trade deal. Thomas-Symonds said it was in Europe’s interests for a regular dialogue to begin again. “It’s about creating a formal structure which is politician to politician and official to official,” he said. “Whatever form it takes, it’s going to have a regularity of meetings.” A first UK-EU summit since Brexit is also being lined up to baptise the new partnership, with officials looking at early 2025 as the most likely date, to allow time for a new European Commission to bed in. Charles Michel, president of the European Council, which represents EU leaders, said on Thursday it would be “good if in the months to come there would be a bilateral summit”. Thomas-Symonds said his comments were “evidence that the suggestions we’re making are well received.” Thomas-Symonds said the Labour government had set out in its manifesto some of its objectives for the new relationship, including seeking a new security pact covering defence, migration and energy. Labour also had specific manifesto proposals to remove Brexit trade barriers, covering areas such as agricultural trade, professional qualifications and visas for touring artists. Most of them are relatively modest and constrained by the “red lines” that Starmer has laid down, insisting he will not take Britain back into the EU, the single market, customs union or restore free movement. The EU has repeatedly rejected any attempt by Britain to “cherry pick” parts of the single market, but Thomas-Symonds wants to explore options for lessening trade burdens by building trust. The EU relations minister said he had been “pleased with the constructive response” to Britain’s overtures and suggested he would look to go beyond Labour’s manifesto if it was in the national interest. “We do have that framework, but I do believe we can be ambitious about this reset,” he said, while insisting the red lines — identical to the ones adopted by Boris Johnson in his “hard Brexit” deal — would remain in place. Thomas-Symonds wants to reassure the EU that the new government has no interest in creating the kind of “Singapore on Thames” vision of a low regulation post-Brexit economic model favoured by some on the Tory right. “We aren’t a government that’s interested in a race to the bottom, whether it’s on environmental standards, workers’ rights or consumer protection,” he said. “We do aspire to have high standards and it’s pretty clear you want to reduce barriers to trade.” Thomas-Symonds, a former barrister, has been entrusted by Starmer as his link person in Brussels. The EU relations minister sits in the Cabinet Office, next door to Number 10. Details of how exactly “structured dialogue” would take place and detailed talks on trade liberalisation will come into focus in the autumn, but for now the priority has been to rebuild relations with the EU. “You can see Britain reconnected on the world stage — you can see the positive and welcoming response that has received,” he said. “The first thing we wanted to do in opening a new chapter was to set a constructive new mood and partnership,” he said, arguing that the EPC meeting capped two weeks of diplomacy since Labour’s election win. Thomas-Symonds, a post-war historian, said Starmer had reassured EU leaders by vowing “we will never withdraw from the European Convention on Human Rights”, removing the threat made by his Conservative predecessor Rishi Sunak. The original 1949 Treaty of London that paved the way for the convention was displayed at Blenheim during this week’s meeting to underline the point. Sir Winston Churchill, who was born at the palace, was an architect of the human rights framework. While Sunak called the European Court of Human Rights in Strasbourg a “foreign court”, Thomas-Symonds wants to reclaim Britain’s role in setting it up: “We are back on the world stage, promoting values that are ours.” But for all the warm words, Thomas-Symonds says Labour has no intention of taking Britain back into the EU: “I don’t think it’s in the national interest to go back to the debates of the past and the uncertainty that would have.” Nor will talks with the EU be easy. For example, the EU would like a youth mobility deal with Britain and improved terms for access to its universities, neither of which are palatable to a government committed to ending free movement and with a higher education funding crisis. But Thomas-Symonds said the diplomacy of the past two weeks had been promising. “We are certainly encouraged,” he said. “It’s about setting a mood, an atmosphere. I don’t think we should be underplaying that.” Additional reporting by Andy Bounds in Brussels and Peter Foster in London

    Airlines grounded, banks and retailers experiencing outages tied to CrowdStrike issue

    Last Updated: July 19, 2024 at 3:01 p.m. ETFirst Published: July 19, 2024 at 3:46 a.m. ET

    Barbara Kollmeyer, Ciara Linnane, James Rogers,

    CrowdStrike shares plunge after software update affects Microsoft’s operating system

    Major airlines grounded flights, airport operations were snarled and companies globally were experiencing computer outages caused by a CrowdStrike cybersecurity platform issue on Friday.

    Companies were gradually rolling out updates to fix the problem, which CrowdStrike blamed on an errant update rather than a security breach or hack.

    American Airlines Group Inc. AAL, -0.38%, Delta Air Lines Inc. DAL, +1.16% and United Airlines Holdings Inc. UAL, +3.32% had to ground flights, and although financial markets were operating, the feed the London Stock Exchange uses to disseminate company announcements was down for several hours.

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    Major hospitals were also scrambling to respond. Mass General Brigham in Boston said that all previously scheduled nonurgent surgeries, procedures and medical visits were canceled Friday, although the hospital remains open for patients with urgent health issues.

    Main Line Health, which has several hospitals in the Philadelphia region, said it is experiencing issues with clinical and nonclinical applications and that elective surgical procedures were paused Friday morning.

    At the University of Kentucky, hospitals and clinics are seeing disruptions due to CrowdStrike issues, and the IT team is working to restore servers and workstations throughout the system and to “prioritize the needs of our most critical and complex patients,” a spokesperson told MarketWatch.

    For more, read: Hospitals, 911 systems scramble to respond to CrowdStrike issues

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    President Joe Biden has been briefed on the outage and his administration is in touch with CrowdStrike and with affected entities, according to the White House.

    “His team is engaged across the interagency to get sector-by-sector updates throughout the day and is standing by to provide assistance as needed,” a White House official said.

    The president was also briefed on a drone attack carried out overnight in Tel Aviv.

    The latest cybersecurity update from CrowdStrike was putting computers using the Microsoft Windows MSFT, -0.74% operating system into a “blue screen” reboot loop. Systems using Apple Inc.’s Macintosh AAPL, +0.06% or Linux operating systems were not affected.

    “CrowdStrike is actively working with customers impacted by a defect found in a single content update for Windows hosts,” CEO George Kurtz said in a statement.

    “Mac and Linux hosts are not impacted. This is not a security incident or cyberattack,” he said. “The issue has been identified, isolated and a fix has been deployed.”

    Kurtz told NBC’s “Today” that the problem was caused by a bug in a single update. The company quickly identified the issue and remediated it, he said.

    Kurtz was asked how a single faulty update could cause such widespread disruption and chaos.

    “We have to go back and see what happened here,” he said, adding that it could be some time before systems are back to normal, because they will not “just automatically recover.”

    The news rattled CrowdStrike’s stock CRWD, -11.10%, in what multiple analysts described as a black eye for the company.

    Raj Joshi, senior vice president at Moody’s, said the incident would hurt CrowdStrike’s reputation, despite the company’s strong track record of innovation, market leadership, growth and customer-retention rates.

    “The disruptions will also negatively impact operating performance, and there is a risk of large potential liability claims from customers that were affected by the outages,” Joshi said. “While this incident calls into question CrowdStrike’s software-engineering practices, it also underscores growing vulnerabilities in global cloud infrastructure from increasing points of failure.”

    The CrowdStrike outage has also affected some applications and services at NASA, according to the space agency.

    “NASA is assessing potential impacts to agency systems related to Microsoft partner CrowdStrike. So far, we have seen some impact to various Microsoft 365 apps and services,” a NASA spokesperson told MarketWatch.

    “Currently, there are no impacts to operations or communications for the International Space Station,” the spokesperson added. “We are continuing to monitor the situation.”

    CrowdStrike’s stock was last down 11% as the fix was being implemented, after falling more than 20% early in the day.

    Microsoft shares MSFT, -0.74% slipped 0.7%.

    Eleanor Laise contributed.

    Russian court convicts journalist Evan Gershkovich, imposes 16-year sentence

    Gershkovich, a Wall Street Journal reporter accredited by Russia’s Foreign Ministry, was arrested in March 2023 in a case his employer called hostage-taking.

    By Robyn Dixon

    Updated July 19, 2024 at 8:57 a.m. EDT|Published July 19, 2024 at 4:57 a.m. EDT

    After a closed trial with secret evidence, a Russian court on Friday convicted American journalist Evan Gershkovich of espionage — charges that the U.S. government said were wholly fabricated — and sentenced him to 16 years in a maximum security penal colony, according to Russian state media.

    Gershkovich was the first American journalist arrested in Russia since the Cold War, and his case has grave implications for press freedoms.

    The trial proceeded with unusual swiftness — suggesting potential developments in negotiations for a prisoner exchange. Trials for espionage in Russia typically take months.

    Gershkovich’s arrest in March 2023 seemed to mark a brazen new chapter in hostage diplomacy, by which the Kremlin detains foreigners on minor, or even baseless, charges to then use them to negotiate exchanges for Russians convicted and imprisoned for serious crimes in the West.

    Senior Russian and U.S. officials have said that talks about an exchange involving Gershkovich are underway but, according to Kremlin policy, would only proceed once the trial was over.

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    The secrecy of the trial and arguments means that the evidence presented against Gershkovich faced no public scrutiny and may never be disclosed. The prosecution on Friday had requested an 18-year prison term on Friday, close to the 20-year maximum.

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    President Biden said in a statement that Gershkovich was targeted because he was an American and a journalist and sentenced to 16 years despite having committed no crime.

    “We are pushing hard for Evan’s release and will continue to do so,” Biden said, describing Gershkovich as a “hostage.”

    “As I have long said and as the U.N. also concluded, there is no question that Russia is wrongfully detaining Evan.”

    In Russia’s highly politicized legal system, where the courts routinely are used to jail journalists, democracy advocates, human rights activists and political opponents of the government, Gershkovich’s conviction had appeared inevitable since his arrest, but supporters and friends nonetheless expressed their shock.

    “Russia has just sentenced an innocent man to 16 years in a high security prison,” Pjotr Sauer, a correspondent for The Guardian and close friend of Gershkovich, posted on X, formerly Twitter. “I have no words to describe this farce. Let’s get Evan out of there.”

    In a joint statement, the Wall Street Journal’s publisher, Almar Latour, and editor in chief, Emma Tucker, called for an end to Gershkovich’s ordeal, which began with his arrest in March last year.

    “This disgraceful, sham conviction comes after Evan has spent 478 days in prison, wrongfully detained, away from his family and friends, prevented from reporting, all for doing his job as a journalist,” the statement said. “We will continue to do everything possible to press for Evan’s release and to support his family.”

    Video published by Russia news outlet Vedemosti showed the judge rapidly reading the judgment, conviction and sentence, as Gershkovich, clad in a black T-shirt, stood in a glass box in the courtroom, his head shaven.

    Journalists were admitted only at the beginning before evidence was presented, and at the end for the reading of the conviction and sentence. An armed security agent wearing a black face mask stood nearby.

    Gershkovich, his employer the Wall Street Journal and the State Department have all strongly denied the accusation that he was working for the CIA. His conviction was widely expected.

    The 32-year-old, who was accredited as a journalist by Russia’s Foreign Ministry, was detained while on a reporting trip to Yekaterinburg and accused of spying. He pleaded not guilty.

    The conviction at least opens the possibility that Gershkovich could be released if the United States can reach a deal with Russia.

    The second day of the trial, at the Sverdlovsk Regional Court in Yekaterinburg, was moved forward to Thursday from Aug. 13 at the request of Gershkovich’s defense team, according to the court.

    Russian prosecutors alleged that Gershkovich was operating on the orders of the CIA, gathering secret information about Uralvagonzavod, a state-owned machine-building factory in Nizhniy Tagil, about 87 miles southeast of Yekaterinburg, which manufactures tanks for Russia’s war on Ukraine.

    Kremlin spokesman Dmitry Peskov said on Friday that the hearing was closed because it was a sensitive case. Russian legal rights activists, however, have reported that the number of cases closed to the public has increased dramatically since Russia’s invasion of Ukraine.

    “You know that the charges there concern espionage,” Peskov said. “Therefore this is a very, very sensitive domain, and therefore, the judge has chosen a closed-door format,” he said during a phone call with journalists. He declined to comment on the possibility of an exchange.

    The U.S. Embassy in Moscow said last month that the case against Gershkovich was “not about evidence, procedural norms, or the rule of law. It is about the Kremlin using American citizens to achieve its political objectives.”

    Fueling the sense that the result was a political inevitability, senior Russian officials immediately denounced the journalist after his arrest in March last year. Within hours, Russian Foreign Ministry spokeswoman Maria Zakharova had proclaimed that his work in Yekaterinburg had “nothing to do with journalism,” and Kremlin spokesman Peskov insisted that Gershkovich had been “caught red-handed.” Neither offered evidence.

    Foreign Minister Sergei Lavrov said Wednesday that Russia had “irrefutable evidence” that the reporter had spied and claimed that the use of journalists as spies “at least in the Anglo-Saxon world, is a tradition.” But Lavrov also confirmed that Russian and U.S. intelligence services were in contact on the possibility of an exchange.

    In February, President Vladimir Putin indicated he would be willing to exchange Gershkovich for a “patriot” who had “eliminated a Russian bandit” in a European capital, an apparent reference to Russian assassin Vadim Krasikov, associated with Russia’s Federal Security Service. Krasikov was convicted of murder in Germany for fatally shooting a former Chechen rebel commander, Zelimkhan Khangoshvili, in broad daylight in a Berlin park in 2019.

    Last month,Deputy Foreign Minister Sergei Ryabkov said Russia was awaiting a response from Washington to its exchange offer. He said “the ball is in the United States’ court. We are waiting for their response to the ideas that were presented to them.”

    Gershkovich’s conviction is likely to have a further chilling effect on the work of foreign journalists in Russia. Many media organizations pulled their correspondents out after his arrest.

    Gershkovich is the first American journalist arrested in Russia for alleged spying since 1986, during the Cold War, when Nicholas Daniloff, a correspondent for U.S. News & World Report, was detained by the Soviet security service. Daniloff was held for 13 days before being freed without facing trial in exchange for Gennadi Zakharov, who had been arrested by the FBI in New York for spying in a sting operation.

    The United Nations’ Working Group on Arbitrary Detentions this month called on Russia to free Gershkovich without a trial and to pay him compensation. It concluded that, “There is a striking lack of any factual or legal substantiation provided by the authorities of the Russian Federation for the espionage charges” against him.

    His arrest was “designed to punish his reporting” on Russia’s war against Ukraine, “lacked a legal basis and is arbitrary,” the U.N. working group said.

    Associates of the late Russian opposition leader Alexei Navalny, who died in jail in Russia in February, said that there was nearly an agreement that month on a deal exchanging Krasikov for Navalny and two Americans.

    That exchange probably would have involved Gershkovich and Paul Whelan, an American serving a 16-year jail term in Russia after being convicted in 2020 of spying.

    Whelan, 54, has spent more than 5 1/2 years in prison in Russia, having been overlooked in two previous exchange deals.

    In his statement, President Biden said that since taking office his highest priority had been seeking the release of Gershkovich, Whelan “and all Americans wrongfully detained and held hostage abroad.”

    But some critics have faulted Biden for putting far more emphasis on the American WNBA star Brittney Griner, who was convicted in Moscow of drug smuggling in August 2022 and freed in an exchange that December for Viktor Bout — a convicted Russian arms trafficker.

    Former Marine Trevor Reed, convicted of assaulting a police officer, was freed in April 2022 in exchange for Russian pilot Konstantin Yaroshenko, who had been jailed in the United States for drug smuggling.

    According to his friends and family, Gershkovich, the son of Soviet-era émigrés, fell in love with Russia when he moved there in 2017 to work for The Moscow Times, a prominent local outlet that pulled out of Russia after Putin’s invasion of Ukraine. He later worked for Agence France-Presse and joined the Wall Street Journal’s Moscow bureau at the beginning of 2022.

    He grew up eating Russian comfort food prepared by his mother Ella Milman and watching classic Soviet-era cartoons. Friends and colleagues describe his open, friendly manner, his passion for reporting and his unerring ability to connect with the people that he meets.

    Since Gershkovich’s arrest, the Wall Street Journal has run a campaign to keep his story in the public eye, promoting the hashtag #FreeEvan and running events such as #CookForEvan, encouraging supporters to prepare his favorite dishes and tell his story as a food enthusiast and a great cook who loves to entertain friends.