Michael Saylor’s Strategy Inc.—formerly known as MicroStrategy—is facing legal heat after an investor filed a class-action lawsuit accusing the firm and its top executives of overstating the financial upside of its Bitcoin treasury strategy while downplaying the risks.
Filed in the U.S. District Court for the Eastern District of Virginia, the complaint centers on allegations that Strategy misled shareholders about the profitability of its aggressive crypto play. The plaintiff, California-based investor Anas Hamza, claims the company provided overly optimistic portrayals of its Bitcoin performance while failing to disclose just how deeply exposed it was to potential losses under newly adopted accounting standards.
At the heart of the case is Strategy’s recent $5.91 billion unrealized loss on its Bitcoin holdings in Q1 2025. According to the lawsuit, the company failed to alert investors that its shift to fair-value accounting would force it to recognize significant downside volatility in real time—marking a departure from its previous method, which only recorded losses when asset values dropped below cost.
Hamza, represented by law firm Pomerantz, argues that Strategy’s public statements painted a “rosy” view of its Bitcoin-centric approach while concealing the true scale of financial risk. The suit names co-founder and executive chairman Michael Saylor, CEO Phong Le, and CFO Andrew Kang as defendants.
While the lawsuit does not specify the amount of damages sought, it alleges violations of federal securities laws and raises broader questions about the transparency of corporate Bitcoin strategies as more public companies embrace digital assets. Strategy has denied wrongdoing and pledged to “vigorously defend” itself against the claims.
Strategy Defends Itself Amid Legal and Market Pressures
Strategy Inc. responded to the lawsuit in a filing with the U.S. Securities and Exchange Commission (SEC), stating that it plans to “vigorously defend” against the allegations. However, the firm acknowledged that it is currently unable to estimate the financial impact of the litigation.
Under Michael Saylor’s leadership, Strategy began accumulating Bitcoin in 2020. The company now holds approximately 576,000 BTC—valued at around $60.6 billion at current market prices. Despite the significant exposure, the shift to fair-value accounting revealed substantial unrealized losses as Bitcoin prices dipped during Q1 2025.
Strategy had previously warned investors in early April of a potential quarterly loss linked to a $5.91 billion markdown on its BTC assets. That estimate proved accurate when the company later posted a net loss of $4.22 billion for the quarter, or $16.49 per share.
The lawsuit, along with growing scrutiny from regulators and investors, is intensifying debate over the long-term viability of corporate crypto strategies—particularly those that are heavily concentrated and lack diversification.
Accounting Shift at Center of Strategy’s Legal Trouble
Strategy Inc.’s move to fair-value accounting for its Bitcoin holdings has become a focal point in the class-action suit. Critics argue the company downplayed the financial implications of the change—even as it publicly lobbied for its adoption.
Previously, the firm used intangible asset accounting, where Bitcoin impairments were only recognized when prices dropped below purchase cost. Gains weren’t recorded unless assets were sold, keeping reported losses muted during downturns. However, under the new fair-value model—approved by the Financial Accounting Standards Board (FASB) in 2023—Strategy must now report real-time gains and losses based on market movements.
Strategy supported the change, calling it a more “relevant” representation of the economic impact of its Bitcoin holdings. But the lawsuit argues the company did not prepare investors for the increased volatility that fair-value accounting would introduce.
Hamza’s complaint also criticizes Strategy’s use of internal metrics like “BTC Yield,” which tracks Bitcoin holdings relative to outstanding shares. Plaintiffs claim such indicators were used to present a more favorable picture of performance while obscuring material risks tied to market fluctuations.
While proponents of the accounting shift say it improves transparency, critics maintain that Strategy failed to sufficiently warn shareholders about its potential to magnify quarterly losses—especially in a volatile market like crypto.
Quick Facts
- Strategy Inc. is facing a class-action lawsuit alleging it misled investors about Bitcoin risks and failed to disclose the impact of fair-value accounting changes.
- The firm posted a $5.91 billion unrealized loss on its Bitcoin holdings in Q1 2025 and a $4.22 billion net loss overall for the quarter.
- Plaintiff Anas Hamza accuses Strategy of painting an overly optimistic view of its BTC strategy while hiding material risks linked to price volatility.
- The lawsuit adds to growing concerns about the transparency and sustainability of corporate crypto strategies, particularly those with high BTC exposure.
