A prominent class-action lawsuit has been initiated against Strategy, formerly known as MicroStrategy, and its executive leadership, alleging they misled investors regarding the profitability and inherent risks associated with the company’s substantial Bitcoin investment strategy. The legal action, brought forth by Pomerantz LLP in the U.S. District Court for the Eastern District of Virginia, revolves around allegations of deceptive financial reporting and inadequate disclosure of material risks.
Core Allegations of Investor Deception
The complaint asserts that Strategy made false and misleading statements concerning its financial performance, particularly through the introduction and use of new Key Performance Indicators (KPIs) such as BTC Yield, BTC Gain, and BTC $ Gain. According to the lawsuit, these metrics were employed to present an overly optimistic view of the company’s significant Bitcoin holdings. Furthermore, the plaintiffs allege that Strategy failed to adequately disclose substantial risks tied to Bitcoin’s extreme price volatility and the crucial implications of impending changes in cryptocurrency accounting standards.
Impact of Evolving Accounting Standards
A significant point of contention highlighted in the lawsuit is Strategy’s transition to the new accounting standard, FASB ASU 2023-08, which became effective on January 1, 2025. This standard mandates that companies value crypto assets at their fair value. Prior to this regulatory shift, Strategy’s accounting practices only recognized impairment losses on its Bitcoin holdings; any appreciation in value was not recorded on the balance sheet until the assets were sold. The move to fair value accounting, which accurately reflects both gains and losses, fundamentally altered the reported financial landscape for entities with considerable cryptocurrency portfolios.
Post-Transition Disclosures and Further Claims
Following the implementation of this accounting change, Strategy disclosed substantial unrealized losses. On April 7, 2025, the company reported unrealized losses totaling $5.91 billion for the first quarter of 2025, a figure that was subsequently confirmed in its financial report on May 1, 2025, as noted by Pomerantz LLP. The complaint further alleges that the defendants systematically overstated the expected returns of their Bitcoin strategy, understated the risks associated with Bitcoin volatility, and downplayed potential losses stemming from the new accounting treatments. These actions, the firm contends, resulted in public statements that were materially false and misleading to investors at various stages.
Senior Crypto Correspondent with over 8 years of experience covering Bitcoin, altcoins, and blockchain technology for leading financial publications. Alexander holds a master’s degree in Financial Economics and specializes in in-depth market analysis, regulatory updates, and interviews with top industry figures.