- Strategy is facing a class action lawsuit alleging it misled investors about risks tied to its Bitcoin strategy and the impact of new fair-value accounting rules.
- The lawsuit follows a reported Q1 loss of USD 4.22B, which the plaintiff claims was foreseeable under the accounting shift Strategy promoted as beneficial but downplayed for volatility.
- Despite legal troubles, Strategy continues aggressive BTC accumulation, now holding 576,000 BTC, worth over USD 60B.
Alongside its recent buying update (acquiring 7,390 Bitcoin, over AU$1.18B), Strategy revealed that it is now facing a class action lawsuit filed on May 16 in the US District Court for the Eastern District of Virginia.
The plaintiff alleges that the company and its executives misled investors and failed to disclose key risks tied to its Bitcoin strategy and upcoming changes to crypto accounting rules.
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Lawsuit Details
In an SEC filing Monday, Strategy said it plans to “vigorously defend” itself against the allegations but admitted it could not predict the outcome or estimate the financial impact of the legal proceedings.
At the center of the lawsuit is Strategy’s January adoption of fair-value accounting for Bitcoin holdings, an industry-wide change approved by the Financial Accounting Standards Board (FASB) last year.
Unlike the previous model, which treated Bitcoin as an intangible asset and only required impairment charges on declines, fair-value accounting requires firms to mark holdings to market each quarter, including both gains and losses.
Strategy backed the shift publicly, writing in a letter that it “would enable us to provide investors with a more relevant view of our financial position and the economic value of our bitcoin holdings.”
But according to the lawsuit, the company downplayed the volatility such accounting could introduce, even as it continued highlighting metrics like “BTC Yield”—a self-defined ratio tracking Bitcoin accumulation per share.
In early April, the firm warned it wasn’t expecting a profitable first quarter, citing a paper loss of nearly US$6B (AU$9.3B) in its Bitcoin holdings. Weeks later, it reported an actual net loss of $4.22B (AU$6.54B), or US$16.49 (AU$25.5) per share.
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Under Saylor’s somewhat aggressive leadership, Strategy has become the largest corporate holder of Bitcoin, now controlling roughly 576,000 BTC valued at over US$60B (AU$93B).
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