NY law firm files class action against Strategy over alleged misleading bitcoin investment disclosures

New York-based law firm Pomerantz LLP filed a class action lawsuit against Michael Saylor-led Strategy, alleging that the company violated federal securities laws by making false and misleading statements about the profitability of its bitcoin investment strategy.The complaint, filed in the Eastern District Court of Virginia, represents investors of Strategy in the period between April 30, 2024, and April 4, 2025. Pomerantz said other investors can join the class action suit until July 15.It alleges that Strategy overstated the profitability of its bitcoin investment strategy and treasury operations, while downplaying volatility risks associated with bitcoin. This renders the company's public statements "materially false and misleading," the statement said.The lawsuit also revolves around Strategy's adoption of the Financial Accounting Standards Board's accounting standards — ASU 2023-08 — that require fair value accounting for crypto assets. This replaced the firm's prior cost-less-impairment model, which only recognized impairments for price drops, and didn't mark up assets for price increases until they were sold.Pomerantz claims that Strategy failed to properly disclose the exact nature or scope of the impact of the new accounting standards on its financial statements, while downplaying risks to investors. "Defendants consistently provided rosy assessments of Strategy's performance as a bitcoin treasury company following its adoption of ASU 2023-08," the law firm said in a statement. "They did this, in part, by reporting and projecting positive BTC Yield, BTC Gain, and BTC $ Gain results, while omitting the immense losses the Company could realize on its bitcoin assets after accounting for these assets under a fair value accounting methodology."Specifically, the lawsuit mentions Strategy's $5.9 billion in unrealized loss from digital assets in Q1, 2025, due to the adoption of ASU 2023-08, which caused the stock price to drop over 8% at the time. Strategy, formerly MicroStrategy, adopted its bitcoin accumulation strategy in 2020 and currently stands as the largest holder of bitcoin among publicly traded companies with 597,325 BTC under its belt.Its stock price has surged significantly since its bitcoin focus, rising 3,328% in the past five years, according to Yahoo Finance data. Its success prompted other companies, such as Metaplanet, to pursue similar strategies. Strategy (MSTR) closed Wednesday with a 7.76% gain, reaching $402.28.The Block has reached out to Strategy for comments.Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.© 2025 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.