In today's context where crypto assets are gradually becoming an important component of enterprise strategic asset allocation, this lawsuit may serve as a significant signal for regulators and market participants to re-examine the accounting and information disclosure standards for crypto assets.
Author: 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. Federal District Court for the Eastern District of Virginia on behalf of all individuals and entities who purchased or otherwise acquired Strategy securities between April 30, 2024, and April 4, 2025. The lawsuit, based on Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, demands that Strategy and some of its senior management be held legally responsible for alleged securities fraud related to Bitcoin investment profitability data and accounting standards, and seeks to recover investment losses. In today's context where crypto assets are gradually becoming an important component of enterprise strategic asset allocation, this lawsuit may serve as a significant signal for regulators and market participants to re-examine the accounting and information disclosure standards for crypto assets.
2. Strategy's Bitcoin Strategy
Strategy, originally a software company focused on enterprise-level business intelligence (BI), cloud-based services, and data analysis, has long provided data visualization, reporting generation, and decision support tools for large enterprise clients. Despite its traditional software business having a certain reputation in the industry, its growth has been slow, with relatively stable revenue and profit performance.
Since 2020, under the leadership of founder Michael Saylor, the company officially established an asset allocation strategy centered on Bitcoin, positioning it as the primary reserve asset alternative to cash. This transformation marked the beginning of Strategy's significant investment in the Bitcoin market, continuously increasing its holdings through multiple rounds of financing. The company not only used its own funds to purchase Bitcoin but also obtained low-cost funds through methods such as issuing convertible bonds, preferred 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. Strategy clearly stated that it would 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 entering 2024, the company has continued to buy Bitcoin during significant price rebounds, especially accelerating its purchases after breaking the $60,000 mark. In the first quarter of 2024 alone, the company added over 12,000 Bitcoins, and by early 2025, its cumulative holdings had exceeded 200,000 Bitcoins, further strengthening its "Bitcoin-centric" 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 of the lawsuit alleges 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 the risks associated with Bitcoin price fluctuations, especially after the adoption of Accounting Standards Update (ASU2023-08), the company might recognize significant losses due to changes in the fair value of crypto assets; Therefore, (3) The company's statements made in public were materially misleading at all critical time points.
Upon analysis, the core allegations are concentrated 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 alleged to have exaggerated the positive financial 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 it constitutes a false statement 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 fully disclose the impact of the ASU2023-08 accounting standard revision on the company's financial data. At the end of 2023, the Financial Accounting Standards Board (FASB) officially passed a new accounting treatment standard for crypto assets, stipulating that enterprises from the 2025 fiscal year (after December 15, 2024), can measure Bitcoin and other crypto assets at fair value and directly reflect fair value changes in the income statement, while also allowing early adoption of the standard.
The prosecution believes that, combining false statements and insufficient disclosure, Strategy is accused of failing to fulfill 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 Contents and Related Challenges of ASU 2023-08 Accounting Standards
ASU 2023-08 was issued by FASB in December 2023, marking a significant change in accounting treatment of crypto assets under US GAAP. This standard applies to interchangeable crypto assets meeting specific conditions, requiring enterprises to measure them at market price in each reporting period, recognize value changes in net profit, and separately disclose 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 short, ASU 2023-08 raises higher requirements for corporate compliance and risk management while improving accounting information quality.
Previously, FinTax had conducted a specialized analysis of ASU 2023-08 accounting standards. For crypto enterprises, adopting ASU 2023-08 as an accounting standard may produce the following impacts: improving financial statement transparency, simplifying accounting processing procedures, changing tax and capital structures, and facing regulatory risks of non-GAAP indicators. Strategy, with Bitcoin investment as its core strategy, had not used fair value accounting method before adopting ASU 2023-08, instead using a cost impairment accounting model for its 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 assets unless sold. Not until April 7, 2025, did the company disclose $5.91 billion in unrealized losses in SEC filings, and explained the loss source from Bitcoin price valuation adjustments in subsequent May quarterly financial press releases and conference calls. As the prosecution argues, this delayed disclosure weakened investors' ability to judge the company's true financial condition and risk exposure during the collective lawsuit, constituting a significant information omission.
5. Conclusion
Overall, the collective lawsuit facing Strategy highlights the dual pressure of information disclosure and compliance monitoring for listed companies in the context of rapid crypto asset development.
On one hand, as enterprises incorporate crypto assets like Bitcoin into their financial structures, their profitability, asset volatility, and financing models are highly dependent on market conditions. Any external statements that fail to fully reflect real risks can easily trigger legal risks of omission or misleading representations.
On the other hand, with the new accounting standards passed by FASB in late 2023 gradually being implemented, enterprises must reflect crypto assets at fair value in financial statements and proactively assess their systematic impacts on asset valuation, profit fluctuations, and disclosure obligations. Failure to timely and accurately explain the nature and scope of this accounting system change could substantially mislead investor expectations.
Therefore, this case not only concerns individual responsibility investigation but may also serve as an example of listed companies balancing disclosure obligations and strategic communication within compliance boundaries under crypto asset accounting standard reforms.
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