TL;DR
- Shareholders led by Pomerantz LLP accuse Strategy of hiding $5.9 billion in unrealized Bitcoin losses after adopting fair-value accounting, claiming misleading statements from April 2024 to April 2025.
- Plaintiffs say executives, including Michael Saylor, painted an overly optimistic picture, triggering an 8% stock drop when the losses surfaced in an April SEC filing.
- Strategy vows to “vigorously defend” the lawsuit, with lead plaintiff nominations due by July 15; a ruling may set new precedents for crypto asset disclosure.
A group of Strategy shareholders, led by New York law firm Pomerantz LLP, has launched a class action suit accusing the company of misleading investors about its Bitcoin treasury performance. Submitted to the U.S. District Court for the Eastern District of Virginia, the complaint addresses the timeframe from April 30, 2024, to April 4, 2025.
Plaintiffs claim that Strategy and certain officers violated federal securities laws by making “materially false and misleading” statements regarding the profitability and risk profile of their Bitcoin holdings.
Alleged Accounting Cover-Up
Central to the lawsuit is the company’s adoption of ASU 2023-08, a new Financial Accounting Standards Board rule requiring crypto assets to be marked at fair value. Before this update, the firm used a cost-less-impairment model, only booking losses when prices dipped and delaying gains until assets were sold.
The plaintiffs claim that Strategy minimized the effects of fair value accounting, highlighting positive Bitcoin yield and gain figures while hiding the $5.9 billion in unrealized losses recorded in Q1 2025. Those losses, they argue, would have altered investor perception had they been transparently disclosed.
Impact on Stock and Investor Confidence
When Strategy revealed the steep unrealized loss in an April 7 SEC filing, its share price tumbled more than 8%, wiping billions off market value. Investors say the company’s earlier rosy forecasts lulled markets into underestimating Bitcoin’s volatility and overstating Strategy’s ability to generate sustainable returns.
Michael Saylor, Strategy’s co-founder, alongside CEO Phong Le and CFO Andrew Kang, are named as defendants, alleged to have perpetuated this optimistic narrative in earnings calls and public statements.
Strategy’s Defense and Next Steps
In response, Strategy has vowed to “vigorously defend” the suit, maintaining that it complied with accounting rules and disclosed all material information. The company has not provided earnings guidance for the disputed period beyond its SEC filings.
Meanwhile, plaintiffs are calling for lead plaintiff nominations by July 15, giving other investors a chance to join the case. If successful, the suit could set a precedent for how public firms must account for crypto assets and manage volatility disclosures in their financial reporting.
