Pomerantz Files Lawsuit Against Strategy Over Bitcoin Strategy Disclosures

New York law firm Pomerantz LLP has initiated a class action lawsuit against Michael Saylor’s Strategy, alleging that the Bitcoin-focused firm misled investors regarding the profitability and risks associated with its cryptocurrency investment strategy. The lawsuit, filed in the Eastern District Court of Virginia, represents shareholders who purchased Strategy stock between April 30, 2024, and April 4, 2025. Investors have until July 15 to join the case.

According to Pomerantz, Strategy overstated the benefits of its Bitcoin treasury strategy while downplaying the volatility and risks inherent in large-scale Bitcoin holdings. The lawsuit claims that the company’s public statements were “materially false and misleading,” creating a distorted picture of financial performance that failed to prepare investors for potential losses.

A central issue in the lawsuit is Strategy’s adoption of new accounting rules under ASU 2023-08, which mandate fair value accounting for crypto assets. Unlike the previous cost-less-impairment method, where Bitcoin was only written down when prices fell and gains were recognized only upon sale, the new standard requires companies to mark assets to market prices each quarter. Pomerantz alleges that Strategy did not adequately explain how these changes could impact its financial results, leaving investors unaware of the potential for substantial unrealized losses.

The complaint highlights Strategy’s first-quarter 2025 earnings, in which the firm disclosed $5.9 billion in unrealized losses due to the adoption of the fair value accounting model. This revelation triggered an 8% drop in Strategy’s stock price, underscoring the volatility risks that the lawsuit claims were previously glossed over.

Since shifting its corporate focus to Bitcoin accumulation in 2020, Strategy, formerly MicroStrategy, has become the largest Bitcoin holder among publicly traded companies, amassing 597,325 BTC. This strategy has fueled explosive gains in its share price, which has climbed more than 3,300% over the past five years. That meteoric rise inspired several other firms, including Metaplanet, to emulate its Bitcoin-centric approach.

Last month, legendary short-seller Jim Chanos criticized the business model popularized by Michael Saylor’s Strategy, calling its approach “financial gibberish.” Chanos noted that Strategy’s market capitalization now tops $100 billion, nearly double the roughly $60 billion worth of Bitcoin it holds on its balance sheet. Saylor has defended Strategy’s valuation, arguing that the company’s ability to raise capital at a premium effectively renders its strategy “risk-free.” Chanos, however, rejected that logic outright, stating, “There’s a wonderful sales job that’s being done about the fact that this is an economic engine in and of itself.”

Matthew Sigel, head of digital asset research at VanEck, has also voiced concerns over the Bitcoin treasury strategies adopted by some publicly traded firms, warning that aggressive BTC accumulation could ultimately hurt shareholders.