Bitcoin Treasury Accounting and Legal Risks for Institutional Investors: Strategic Legal Resolution and Corporate Transparency in Crypto Asset Management

The rise of corporate

The

Strategy

Inc. Case: A Legal Turning Point

In May 2025, investors filed a class action lawsuit against Strategy Inc., alleging that the firm misrepresented the risks of its Bitcoin treasury strategy and the implications of adopting fair-value accounting under FASB’s ASU No. 2023-08 [1]. The plaintiffs claimed the company overstated the benefits of marking-to-market its $68.5 billion Bitcoin holdings while failing to disclose the volatility and tax liabilities inherent in the new standard [2]. The lawsuit gained momentum after Strategy reported a $4.22 billion net loss in Q1 2025, attributed to unrealized losses under the updated rules [3].

However, the case was voluntarily dismissed with prejudice in August 2025, a legal victory for Strategy and its executives [4]. Courts appeared to prioritize technical compliance with ASU 2023-08 over allegations of misrepresentation, provided disclosures were deemed accurate. This outcome underscores a key takeaway for institutional investors: legal defenses in crypto treasury disputes increasingly hinge on adherence to evolving accounting standards.

ASU 2023-08: A Double-Edged Sword for Transparency

The FASB’s updated guidance mandates that crypto assets be measured at fair value, with changes in value directly impacting net income [2]. While this provides a real-time view of a company’s financial health, it also amplifies volatility and complicates shareholder expectations. For instance, Strategy’s aggressive Bitcoin accumulation—now over 632,457 BTC—exposes it to significant swings in reported earnings, even as its long-term strategic value remains intact [1].

The standard also introduces stringent disclosure requirements, including the cost basis and fair value of significant holdings [2]. These rules aim to enhance transparency but create operational challenges for firms managing large crypto portfolios. The Strategy case highlights how companies must balance these disclosures with strategic messaging to avoid legal pitfalls.

Broader Implications for Institutional Investors

With over 152 public companies now holding $110 billion in corporate Bitcoin, the Strategy litigation signals a broader trend: legal risks are shifting from operational mismanagement to accounting compliance [3]. Institutional investors must now evaluate not only a firm’s Bitcoin strategy but also its ability to navigate regulatory frameworks like ASU 2023-08.

The dismissal of the lawsuit also raises questions about the enforceability of shareholder claims in crypto treasury disputes. If courts continue to prioritize technical compliance over subjective allegations of misrepresentation, companies may gain more leeway in structuring their Bitcoin strategies—provided they meet disclosure thresholds. This could incentivize firms to adopt more aggressive crypto allocations, confident that legal barriers are lower than previously assumed.

Conclusion: Navigating the New Normal

The Strategy case exemplifies the delicate balance between innovation and accountability in crypto asset management. For institutional investors, the takeaway is clear: corporate transparency must evolve in tandem with regulatory standards. While ASU 2023-08 introduces complexity, it also creates a framework for evaluating the true economic risks and rewards of Bitcoin treasuries. As the legal landscape matures, firms that prioritize rigorous compliance and proactive disclosure will likely emerge as leaders in this high-stakes arena.

Source:
[1] Investors drop class action over Strategy's Bitcoin accounting [https://www.mitrade.com/insights/news/live-news/article-3-1082106-20250830]
[2] FASB issues final ASU on crypto asset accounting [https://kpmg.com/us/en/frv/reference-library/2023/fasb-to-issue-final-crypto-asset-accounting-asu.html]
[3] Strategy investors drop class action alleging Bitcoin ... [https://www.theblock.co/post/368801/strategy-investors-drop-class-action-alleging-bitcoin-treasury-company-misled-them]
[4] Bitcoin Firm Strategy Wins Lawsuit with Prejudice After ... [https://www.ainvest.com/news/bitcoin-firm-strategy-wins-lawsuit-prejudice-plaintiffs-dismiss-claims-2508/]