Kyndryl Faces Securities Class Action After Reporting Internal Control Weaknesses

Company files amended financial reports detailing issues, leading to departure of 3 key executives

Mar. 13, 2026 at 4:49pm by Ben Kaplan

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Kyndryl Holdings, Inc. (NYSE: KD) has filed amended quarterly and annual reports disclosing material weaknesses in its internal controls and financial reporting, shortly after the company announced it would not timely file its Q4 2025 report, revealed an SEC investigation, and saw the departures of its CFO, General Counsel, and Comptroller. These developments have prompted a securities class action lawsuit against Kyndryl, alleging the company misled investors about the effectiveness of its internal controls and financial practices.

Why it matters

Kyndryl's disclosure of internal control issues and the subsequent market reaction, including a 55% stock price drop, highlight the importance of robust financial reporting and transparency for public companies. The pending securities lawsuit also underscores the legal risks companies face when investors believe they have been misled about the state of a company's finances.

The details

Kyndryl's amended filings reveal that the company's disclosure controls, procedures, and internal control over financial reporting were ineffective as of March 31, June 30, and September 30, 2025. The filings also state that 'senior finance executives failed to set an appropriate tone at the top' and there was a 'lack of transparency' with the CEO, Audit Committee, and Board regarding cash management practices like deferring vendor payments.

  • On February 9, 2026, Kyndryl announced it would not timely file its Q4 2025 report, anticipated reporting material internal control weaknesses, and revealed the departures of its CFO, General Counsel, and Comptroller.
  • On February 17, 2026, Kyndryl filed the amended quarterly and annual reports detailing the internal control issues.

The players

Kyndryl Holdings, Inc.

An infrastructure services company that was spun off from IBM in 2021.

David Wyshner

Former CFO of Kyndryl who departed the company on February 5, 2026.

Edward Sebold

Former General Counsel of Kyndryl who departed the company on February 5, 2026.

Vineet Khurana

Former Comptroller of Kyndryl who stepped down on February 5, 2026.

Hagens Berman

A national shareholder rights law firm investigating claims that Kyndryl violated federal securities laws.

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What they’re saying

“We're investigating whether, having assured investors of the effectiveness of its internal controls and repeatedly touted free cash flow growth, Kyndryl may have intentionally misled investors about the propriety of its deferring vendor payments quarter to quarter and whether such practices may have allowed the company to improperly unlock cash.”

— Reed Kathrein, Partner, Hagens Berman (Hagens Berman)

What’s next

The securities class action lawsuit against Kyndryl is ongoing, and the firm Hagens Berman is continuing its investigation into potential federal securities law violations by the company.

The takeaway

Kyndryl's disclosure of internal control weaknesses and the subsequent market fallout underscore the importance of public companies maintaining robust financial reporting and transparency. The pending securities lawsuit also highlights the legal risks companies face when investors believe they have been misled about the state of a company's finances.