New York law firm Pomerantz LLP has filed a class action lawsuit against Michael Saylor’s Strategy, accusing the Bitcoin-focused firm of misleading investors about the profitability and risks of its crypto investment strategy.
Key Takeaways:
- Pomerantz filed a class action accusing Strategy of misleading investors about bitcoin risks.
- The lawsuit centers on Strategy’s failure to disclose the impact of new fair value accounting rules.
- Strategy revealed $5.9 billion in unrealized losses, causing an 8% stock drop in Q1 2025.
The complaint, lodged in the Eastern District Court of Virginia, represents Strategy shareholders who purchased stock between April 30, 2024, and April 4, 2025. Investors have until July 15 to join the case.
According to Pomerantz, Strategy overstated the benefits of its Bitcoin treasury strategy and downplayed the volatility and risks inherent to large-scale Bitcoin holdings.
Lawsuit Alleges Strategy Misled Investors With Rosy Bitcoin Claims
The lawsuit claims the company’s public statements were “materially false and misleading,” creating a distorted picture of financial performance that failed to prepare investors for potential losses.
A key issue centers on Strategy’s adoption of new accounting rules under ASU 2023-08, which require fair value accounting for crypto assets.
Unlike the previous cost-less-impairment method, where Bitcoin was only written down when prices fell and gains were recognized only upon sale, the new standard forces companies to mark assets to market prices each quarter.
Pomerantz alleges Strategy did not properly explain how these changes could impact its financial results, leaving investors in the dark about the potential for substantial unrealized losses.
The complaint highlights Strategy’s first-quarter 2025 earnings, in which the firm disclosed $5.9 billion in unrealized losses due to adopting the fair value accounting model.
That revelation triggered an 8% drop in Strategy’s stock price, underscoring the volatility risks the lawsuit says were previously glossed over.
Since shifting its corporate focus to bitcoin accumulation in 2020, Strategy, formerly MicroStrategy, has become the largest Bitcoin holder among publicly traded companies, amassing 597,325 BTC.
The strategy has fueled explosive gains in its share price, which has climbed more than 3,300% over the past five years.
That meteoric rise inspired several other firms, including Metaplanet, to emulate its Bitcoin-centric approach.
Legendary Short-Seller Slams Bitcoin Treasuries as ‘Financial Gibberish’
Last month, legendary short-seller Jim Chanos criticized the business model popularized by Michael Saylor’s Strategy, calling its approach “financial gibberish.”
Chanos noted that Strategy’s market capitalization now tops $100 billion, nearly double the roughly $60 billion worth of Bitcoin it holds on its balance sheet.
Saylor has defended Strategy’s valuation, arguing that the company’s ability to raise capital at a premium effectively renders its strategy “risk-free.” Chanos, however, rejected that logic outright.
“There’s a wonderful sales job that’s being done about the fact that this is an economic engine in and of itself,” he said.
Matthew Sigel, head of digital asset research at VanEck, has also voiced concerns over the Bitcoin treasury strategies adopted by some publicly traded firms, warning that aggressive BTC accumulation could ultimately hurt shareholders.
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