TLDR
Strategy faces class action over claims it misled investors on Bitcoin returns and risks.
Lawsuit cites $5.9B in unrealized losses after Strategy adopted new crypto accounting rules.
Investors allege Strategy downplayed Bitcoin volatility while overstating BTC-related gains.
Shareholders have until July 15 to join suit over misleading crypto disclosures from Strategy.
A class action lawsuit has been filed against bitcoin-focused firm Strategy by New York law firm Pomerantz LLP. The complaint accuses Strategy of making false and misleading statements regarding its bitcoin investment and accounting practices. The case, filed in the U.S. District Court for the Eastern District of Virginia, represents investors who bought Strategy shares between April 30, 2024, and April 4, 2025.
According to Pomerantz, Strategy failed to provide accurate details about its bitcoin strategy and the risks it carried. The firm also claims that Strategy’s financial statements did not properly reflect losses tied to a recent change in accounting rules. Investors who purchased shares during the specified period have until July 15 to join the lawsuit.
Alleged Misstatements on Bitcoin Strategy and Treasury Operations
The complaint centers on statements made by Strategy about the profitability of its bitcoin investment and treasury strategies. Pomerantz alleges that the company overstated returns while downplaying the volatility and risk associated with bitcoin holdings.
These claims were included in various public communications, financial reports, and press statements released during the class period.
Pomerantz said Strategy “consistently provided rosy assessments” of its bitcoin performance, projecting positive results labeled as BTC Yield, BTC Gain, and BTC $ Gain. However, the firm says these reports did not reflect potential or existing losses tied to declining bitcoin prices. The law firm argues that this made Strategy’s public statements misleading for investors.
Accounting Standards and the Reporting of Unrealized Losses
The lawsuit also focuses on Strategy’s adoption of a new accounting rule issued by the Financial Accounting Standards Board (FASB). The new rule, ASU 2023-08, requires companies to apply fair value accounting to their crypto holdings.
This change replaced the older cost-less-impairment model, which only recorded losses if bitcoin prices fell, and did not allow gains to be recognized unless assets were sold.
Pomerantz claims Strategy failed to clearly explain how the shift in accounting standards would affect its financial position. In Q1 2025, Strategy reported $5.9 billion in unrealized losses due to the new fair value method. Following this disclosure, the company’s stock price dropped more than 8%.
Investor Concerns and Market Reaction
The drop in stock value has drawn attention from shareholders who say they were not properly informed of the risks.
Many believed Strategy’s reports reflected ongoing gains rather than potential losses based on Bitcoin’s market price changes. The lawsuit says investors would have acted differently if they had known the full financial impact.
Strategy, formerly known as MicroStrategy, has held a bitcoin-focused approach since 2020. It currently owns over 597,000 BTC, the most among publicly traded firms. Despite recent concerns, its stock has seen major long-term growth, climbing more than 3,300% over the past five years. On Wednesday, Strategy’s stock (MSTR) rose 7.76%, closing at $402.28.
Next Steps in the Case
The legal proceedings will determine whether Strategy violated federal securities laws as claimed by Pomerantz LLP. The court will review if the company’s disclosures were incomplete or misleading under the new accounting standards. Shareholders who meet the criteria are eligible to join the class action until mid-July.
Strategy has not released a detailed public response to the lawsuit. The outcome could affect how publicly traded companies report crypto assets going forward. Pomerantz’s case may influence other shareholders to seek legal remedies if similar losses were experienced during the class period.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
