Will CrowdStrike receive a DOJ/SEC enforcement action, Wells notice, or criminal charge related to the Carahsoft revenue recognition investigation by January 31, 2027?

DOJ/SEC investigations of this nature typically take 2-4 years from disclosure to enforcement. Disclosure was June 2025, so by Jan 2027 we're only 19 months in. SEC enforcement actions average 3+ years. However, the investigation expanding to HHS/DOE suggests active investigation, not dying. DOJ involvement suggests criminal dimension, but DOJ investigations are generally slower than SEC-alone. The delayed disclosure (5 months) and CEO highlighting the suspect deal could accelerate SEC timeline given clear evidence trail. SEC investigations result in enforcement ~50-60% overall, but the specific timeline constraint (by Jan 2027) significantly reduces probability. P(Wells by Jan 2027) ~18%, small additional probability for other events.

The question asks about enforcement BY January 31, 2027, not whether enforcement ever occurs. CrowdStrike knew about the SEC investigation since January 2025, so by Jan 2027 the investigation would be ~24 months old — within the Wells notice window (median 18-30 months). The expansion to HHS/DOE suggests building a pattern case, which takes longer to assemble. The class action dismissal without prejudice is neutral — plaintiffs often wait for government results. CFO excess selling (2x vest amount) is concerning but not dispositive. The most likely single outcome is investigation remaining open with no action, which resolves NO.

Need to evaluate the disjunction: ANY of Wells notice, enforcement action, criminal charges, or restatement triggers YES. Wells notice is lowest bar and most likely first. The 50-60% probability of pattern-level investigation increases enforcement likelihood, but timing is binding. Government investigations of public companies rarely move faster than 18-24 months. Given investigation started ~Jan 2025, by Jan 2027 = 24 months. A Wells notice within 24 months is plausible but not base case. Restatement is independent of government — PwC covers GAAP not non-GAAP ARR, creating a crack. P(Wells ~18%) + P(DOJ charges ~3%) + P(Restatement ~4%) with overlap ~23%.

This is fundamentally a timing question. The base rate for SEC enforcement after disclosure is meaningful, but 19 months from disclosure is aggressive for resolution. Scope expansion (pattern, not isolated), DOJ involvement (criminal dimension), and clear paper trail (CEO on earnings call, internal employee flags, IRS never purchased) push probability up. Government investigation speed (average 3+ years), no public updates, and class action dismissal push down. Wells notice is lightest touch and most likely in this timeframe. P(Wells by Jan 2027) ~20%, P(any other enumerated event) ~5% additional.

Anchoring on empirical base rates: SEC investigations resulting in enforcement ~55-60%. Median time to Wells notice from investigation start ~18-30 months. By Jan 2027, investigation would be ~24 months old (started no later than Jan 2025). This puts us within median Wells notice window but not comfortably so. Scope expansion to HHS/DOE suggests still building case — would need to complete multi-agency review before deciding. The 8+ months of silence since disclosure is ambiguous per committee (cannot distinguish dying investigation from normal pace). Insider selling (100% sell-side, CFO 2x vest excess) is suggestive but not determinative. Revenue restatement low probability given PwC clean audits. This comes down to P(Wells by Jan 2027) ~18-20%, plus small incremental probabilities.

The most likely outcome by Jan 2027 is investigation still ongoing with no formal action — government investigations of this complexity (expanding to multiple agencies and departments) typically take 3-5 years. The expansion itself argues against quick resolution in either direction. However, resolution criteria also includes revenue/ARR restatement, which is company-initiated and could occur at any time if internal review discovers issues. PSU awards tied to ARR create both motive (to inflate) and discovery pressure (auditors examining). Weighting slightly higher than pure government-timeline analysis due to the restatement path being independent and the $1.2B non-GAAP adjustment creating 10x GAAP/non-GAAP divergence.

Government investigations are slow. DOJ/SEC joint investigation disclosed 8 months ago with expanding scope to HHS/DOE — suggests case building still early. By Jan 2027 = ~19 months from disclosure. Base rate for formal enforcement action within 19 months of disclosure is low. Wells notice is most plausible event in this timeframe but still below base case. Most likely outcome: investigation ongoing, resolves NO.

DOJ/SEC joint investigation expanded beyond original $32M deal to HHS and DOE contracts. Timeline to enforcement typically 2-4 years. By Jan 2027 = ~24 months from investigation start (Jan 2025). Wells notice is most likely first formal event. Insider selling pattern (100% sell-side, CFO excess) suggestive but not dispositive. Base rate ~20-25% for any formal action within 24-month window of investigation start.

Multiple paths to YES: Wells notice, enforcement action, criminal charges, or restatement. Each individually low probability by Jan 2027. Wells notice ~18%, enforcement ~5%, criminal ~2%, restatement ~3%. Combined ~25% after accounting for positive correlation between events. Government timelines are the binding constraint but the disjunctive resolution criteria creates multiple parallel paths.