Written by: FinTax
1. Event Overview
In early July 2025, the law firm Pomerantz filed a class-action lawsuit against Strategy (formerly MicroStrategy, NASDAQ ticker: MSTR) in the U.S. District Court for the Eastern District of Virginia on behalf of individuals and entities who purchased or acquired Strategy securities between April 30, 2024, and April 4, 2025. The lawsuit, based on Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, demands that Strategy and some of its senior executives be held legally responsible for alleged securities fraud related to Bitcoin investment profitability data and accounting standards, seeking to recover investment losses. In an era where crypto assets are gradually becoming an important part of corporate asset allocation strategies, this lawsuit may serve as a significant signal for regulators and market participants to re-examine accounting and information disclosure standards for crypto assets.
2. Strategy's Bitcoin Strategy
Strategy was originally a software company focused on enterprise-level business intelligence (BI), cloud-based services, and data analysis, long providing data visualization, reporting generation, and decision support tools for large enterprise clients. Despite its traditional software business having a certain reputation in the industry, growth was slow, with relatively stable revenue and profit performance.
Since 2020, under the leadership of founder Michael Saylor, the company officially established a Bitcoin-centric asset allocation strategy, positioning it as the primary reserve asset alternative to cash. This transformation marked Strategy's significant investment in the Bitcoin market through multiple rounds of financing. The company not only used its own funds to purchase Bitcoin but also obtained low-cost funds through convertible bonds, priority notes, and Bitcoin-collateralized loans to amplify its investment scale. Subsequently, Strategy transformed from a simple enterprise software company to a leveraged Bitcoin financial company.
The core of its Bitcoin strategy is long-term holding, with Strategy explicitly stating that it will not actively sell its assets but instead use Bitcoin's long-term appreciation potential to enhance the company's total assets and market value. Since 2024, the company continued to buy Bitcoin during significant price rebounds, especially accelerating purchases after it broke $60,000. In the first quarter of 2024 alone, the company added over 12,000 Bitcoins, accumulating more than 200,000 Bitcoins by early 2025, further strengthening its "Bitcoin-based" corporate image and making its stock price highly correlated with Bitcoin's trend, becoming a notable alternative crypto asset carrier in the capital market.
3. Core Allegations
The core allegations in the lawsuit are that Strategy and its executives issued several false and/or misleading statements or failed to fully disclose key information, primarily including: (1) exaggerating the expected profitability of the company's Bitcoin investment strategy and fund operations; (2) failing to adequately reveal risks associated with Bitcoin price fluctuations, especially potential significant losses from crypto asset fair value changes after adopting Accounting Standards Update (ASU) 2023-08; therefore, (3) the company's public statements were materially misleading at all critical time points.
The analysis suggests that the core allegations focus on two aspects: first, false or misleading statements about the profitability of its Bitcoin investment strategy, and second, failure to timely disclose the significant impact of new accounting standards and downplaying related risks.
On one hand, the lawsuit argues that the company made false and misleading statements about the profitability of its Bitcoin investment strategy, violating federal securities laws. As a publicly listed company, Strategy is responsible for accurately reflecting the actual contribution of Bitcoin investments to the company's profitability in its financial reports and public statements. However, the company is accused of exaggerating the financial positive effects of Bitcoin in multiple external communications, obscuring its actual reliance on book gains from price increases rather than the continuous profitability of its core business. Simultaneously, the company might have used adjusted non-GAAP indicators or positive language to portray profitability prospects, concealing the real financial pressure from crypto asset price fluctuations. Such behavior, if constituting false statements about material matters, could potentially violate Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
On the other hand, Strategy is also accused of failing to timely and adequately disclose its financial data according to the ASU 2023-08 accounting standard revision. In late 2023, the Financial Accounting Standards Board (FASB) officially passed a new accounting treatment standard for crypto assets, stipulating that enterprises can measure Bitcoin and other crypto assets at fair value from the 2025 fiscal year (after December 15, 2024), directly reflecting fair value changes in the income statement, and allowing early adoption of the standard.
The plaintiffs believe that combining false statements and insufficient disclosure, Strategy is accused of not fulfilling its legal obligations for information disclosure as a listed company during the critical time window, thereby misleading investors and causing actual economic losses.
4. Main Content and Challenges of ASU 2023-08 Accounting Standard
ASU 2023-08, issued by FASB in December 2023, marks a significant change in crypto asset accounting treatment under U.S. GAAP. This standard applies to interchangeable crypto assets meeting specific conditions, requiring enterprises to measure them at market prices in each reporting period, record value changes in current net income, and separately list related information in financial statements. The new rule takes effect for fiscal years starting after December 15, 2024, with early adoption allowed. The standard introduces more detailed disclosure requirements, including crypto asset types, quantity, fair value, restriction information, and period changes, enhancing financial report transparency and consistency. In essence, ASU 2023-08 raises higher requirements for corporate compliance capabilities and risk management while improving accounting information quality.
For crypto enterprises, adopting ASU 2023-08 as an accounting standard may produce the following impacts: improving financial statement transparency, simplifying accounting processes, changing tax and capital structures, and facing regulatory risks from non-GAAP indicators. Before adopting ASU 2023-08, Strategy, which has Bitcoin investment as its core strategy, did not use fair value accounting methods but instead used a cost-impairment accounting model for Bitcoin, classifying its large Bitcoin holdings as intangible assets. Under this accounting model, Strategy only needed to recognize impairment when prices dropped and would not appreciate the asset unless sold. Not until April 7, 2025, did the company disclose in an SEC filing an unrealized loss of $5.91 billion due to adopting the standard, and explained the loss source in subsequent May quarterly financial press releases and conference calls. As the plaintiffs argue, this delayed disclosure undermined investors' ability to judge the company's true financial condition and risk exposure during the class action period, constituting a material information omission.
5. Conclusion
Overall, the class-action lawsuit facing Strategy highlights the dual pressure faced by listed companies in information disclosure and compliance monitoring in the context of rapid crypto asset development.
On one hand, as enterprises incorporate Bitcoin and other crypto assets into their financial structures, their profitability, asset volatility, and financing models are highly dependent on market conditions. Any external statements that do not fully reflect real risks can easily trigger legal risks of omission or misleading representations.
On the other hand, with the gradual implementation of the new accounting standards passed by FASB at the end of 2023, enterprises must reflect crypto assets at fair value in their financial statements and proactively assess their systematic impact on asset valuation, profit volatility, and disclosure obligations. Failure to timely and accurately explain the nature and scope of this accounting system change could potentially constitute a substantive misleading of investor expectations.
Therefore, this case is not only about pursuing individual case responsibilities but may also be an example of listed companies fulfilling disclosure obligations and balancing strategic publicity with compliance boundaries under the background of crypto asset accounting standards reform.
