The class action lawsuit against Strategy highlights the dual pressures public companies face regarding disclosure and regulatory compliance amid the rapid development of crypto assets.

In early July 2025, law firm Pomerantz filed a class action lawsuit against Strategy (formerly MicroStrategy, NASDAQ: MSTR) in the U.S. District Court for the Eastern District of Virginia on behalf of all individuals and entities that purchased or otherwise acquired Strategy securities between April 30, 2024, and April 4, 2025. The lawsuit alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, accusing Strategy and certain executives of securities fraud related to Bitcoin investment profit data and accounting standards. The plaintiffs seek compensation for investment losses.

As crypto assets increasingly become a strategic component of corporate asset allocation, this lawsuit may serve as a critical signal for regulators and market participants to re-examine accounting and disclosure standards for crypto assets.

Originally a business intelligence (BI) and data analytics software company, Strategy provided enterprise-level cloud services, data visualization, and decision-support tools. While its traditional software business was well-established, growth had stagnated, with steady but unremarkable revenue and profits.

In 2020, under the leadership of founder Michael Saylor, Strategy pivoted to a Bitcoin-centric asset allocation strategy, positioning it as a primary reserve asset alternative to cash. This shift involved significant Bitcoin purchases funded through multiple financing rounds, including convertible bonds, senior notes, and Bitcoin-collateralized loans. Strategy effectively transformed into a leveraged Bitcoin financial firm rather than a conventional software company.

The core of Strategy’s Bitcoin strategy is long-term holding, with no plans for active sales. The company aims to leverage Bitcoin’s appreciation potential to boost total assets and market capitalization. In 2024, as Bitcoin prices rebounded sharply, Strategy accelerated purchases, adding over 12,000 BTC in Q1 alone. By early 2025, its holdings exceeded 200,000 BTC, cementing its "Bitcoin standard" corporate identity and tightly coupling its stock price with Bitcoin’s performance.

The lawsuit alleges that Strategy and its executives made materially false and/or misleading statements or failed to disclose critical information, including:

1. Exaggerated Profitability Claims: Overstating the expected profitability of its Bitcoin investment strategy and funding operations.

2. Risk Disclosure Failures: Failing to adequately disclose risks associated with Bitcoin price volatility, particularly after adopting Accounting Standards Update (ASU) 2023-08, which required recognizing significant losses due to fair value fluctuations.

3. Material Misrepresentations: Making public statements that were materially misleading at all relevant times.

The allegations focus on two core issues:

• Misleading Profitability Claims: The lawsuit argues that Strategy falsely portrayed Bitcoin investments as a sustainable profit driver rather than a speculative bet on price appreciation. The company allegedly used adjusted non-GAAP metrics and optimistic language to obscure the financial risks of crypto volatility.

• Delayed Adoption of ASU 2023-08: Strategy did not adopt the new accounting standard until April 7, 2025, when it disclosed a $5.91 billion unrealized loss due to Bitcoin’s price decline. Plaintiffs contend that this delayed disclosure impaired investors’ ability to assess the company’s true financial exposure during the class period.

Issued by the Financial Accounting Standards Board (FASB) in December 2023, ASU 2023-08 introduced major changes to U.S. GAAP for crypto asset accounting. Key provisions include:

• Fair Value Measurement: Requiring eligible crypto assets (e.g., Bitcoin) to be measured at fair value each reporting period, with changes recognized in net income.

• Enhanced Disclosures: Mandating detailed disclosures on crypto holdings, including quantity, fair value, restrictions, and period-to-period changes.

• Early Adoption Permitted: Effective for fiscal years beginning after December 15, 2024, with early adoption allowed.

Previously, Strategy used the cost-less-impairment model, classifying Bitcoin as an intangible asset. Under this approach, impairments were recognized only on price declines, with no upward revaluations. The shift to fair value accounting exposed Strategy to greater earnings volatility, which the lawsuit claims was not adequately communicated to investors.

The Strategy lawsuit underscores the dual challenges public companies face in crypto asset adoption:

1. Disclosure Risks: Profitability narratives must accurately reflect crypto’s speculative nature and price dependency to avoid misleading investors.

2. Regulatory Evolution: New accounting standards like ASU 2023-08 demand timely adoption and transparent reporting of fair value impacts.

This case is not just about individual liability but also serves as a precedent for how companies balance strategic promotion with compliance in the evolving crypto accounting landscape. Firms must proactively assess disclosure obligations, manage investor expectations, and navigate the heightened scrutiny of crypto-related financial reporting.

Key Takeaways:

• For Investors: Scrutinize corporate crypto disclosures, especially non-GAAP adjustments and risk disclaimers.

• For Companies: Align crypto strategies with accounting standards early, ensuring clear communication of volatility risks.

• For Regulators: Expect tighter enforcement as crypto integration tests the limits of traditional disclosure frameworks.

The class action lawsuit against Strategy highlights the dual pressures public companies face regarding disclosure and regulatory compliance amid the rapid development of crypto assets.

In early July 2025, law firm Pomerantz filed a class action lawsuit against Strategy (formerly MicroStrategy, NASDAQ: MSTR) in the U.S. District Court for the Eastern District of Virginia on behalf of all individuals and entities that purchased or otherwise acquired Strategy securities between April 30, 2024, and April 4, 2025. The lawsuit alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, accusing Strategy and certain executives of securities fraud related to Bitcoin investment profit data and accounting standards. The plaintiffs seek compensation for investment losses.

As crypto assets increasingly become a strategic component of corporate asset allocation, this lawsuit may serve as a critical signal for regulators and market participants to re-examine accounting and disclosure standards for crypto assets.

Originally a business intelligence (BI) and data analytics software company, Strategy provided enterprise-level cloud services, data visualization, and decision-support tools. While its traditional software business was well-established, growth had stagnated, with steady but unremarkable revenue and profits.

In 2020, under the leadership of founder Michael Saylor, Strategy pivoted to a Bitcoin-centric asset allocation strategy, positioning it as a primary reserve asset alternative to cash. This shift involved significant Bitcoin purchases funded through multiple financing rounds, including convertible bonds, senior notes, and Bitcoin-collateralized loans. Strategy effectively transformed into a leveraged Bitcoin financial firm rather than a conventional software company.

The core of Strategy’s Bitcoin strategy is long-term holding, with no plans for active sales. The company aims to leverage Bitcoin’s appreciation potential to boost total assets and market capitalization. In 2024, as Bitcoin prices rebounded sharply, Strategy accelerated purchases, adding over 12,000 BTC in Q1 alone. By early 2025, its holdings exceeded 200,000 BTC, cementing its "Bitcoin standard" corporate identity and tightly coupling its stock price with Bitcoin’s performance.

The lawsuit alleges that Strategy and its executives made materially false and/or misleading statements or failed to disclose critical information, including:

1. Exaggerated Profitability Claims: Overstating the expected profitability of its Bitcoin investment strategy and funding operations.

2. Risk Disclosure Failures: Failing to adequately disclose risks associated with Bitcoin price volatility, particularly after adopting Accounting Standards Update (ASU) 2023-08, which required recognizing significant losses due to fair value fluctuations.

3. Material Misrepresentations: Making public statements that were materially misleading at all relevant times.

The allegations focus on two core issues:

• Misleading Profitability Claims: The lawsuit argues that Strategy falsely portrayed Bitcoin investments as a sustainable profit driver rather than a speculative bet on price appreciation. The company allegedly used adjusted non-GAAP metrics and optimistic language to obscure the financial risks of crypto volatility.

• Delayed Adoption of ASU 2023-08: Strategy did not adopt the new accounting standard until April 7, 2025, when it disclosed a $5.91 billion unrealized loss due to Bitcoin’s price decline. Plaintiffs contend that this delayed disclosure impaired investors’ ability to assess the company’s true financial exposure during the class period.

Issued by the Financial Accounting Standards Board (FASB) in December 2023, ASU 2023-08 introduced major changes to U.S. GAAP for crypto asset accounting. Key provisions include:

• Fair Value Measurement: Requiring eligible crypto assets (e.g., Bitcoin) to be measured at fair value each reporting period, with changes recognized in net income.

• Enhanced Disclosures: Mandating detailed disclosures on crypto holdings, including quantity, fair value, restrictions, and period-to-period changes.

• Early Adoption Permitted: Effective for fiscal years beginning after December 15, 2024, with early adoption allowed.

Previously, Strategy used the cost-less-impairment model, classifying Bitcoin as an intangible asset. Under this approach, impairments were recognized only on price declines, with no upward revaluations. The shift to fair value accounting exposed Strategy to greater earnings volatility, which the lawsuit claims was not adequately communicated to investors.

The Strategy lawsuit underscores the dual challenges public companies face in crypto asset adoption:

1. Disclosure Risks: Profitability narratives must accurately reflect crypto’s speculative nature and price dependency to avoid misleading investors.

2. Regulatory Evolution: New accounting standards like ASU 2023-08 demand timely adoption and transparent reporting of fair value impacts.

This case is not just about individual liability but also serves as a precedent for how companies balance strategic promotion with compliance in the evolving crypto accounting landscape. Firms must proactively assess disclosure obligations, manage investor expectations, and navigate the heightened scrutiny of crypto-related financial reporting.

Key Takeaways:

• For Investors: Scrutinize corporate crypto disclosures, especially non-GAAP adjustments and risk disclaimers.

• For Companies: Align crypto strategies with accounting standards early, ensuring clear communication of volatility risks.

• For Regulators: Expect tighter enforcement as crypto integration tests the limits of traditional disclosure frameworks.