Strategy Faces Lawsuit Over Bitcoin Strategy Misrepresentation 8.67% Share Drop

Coin WorldTuesday, May 20, 2025 5:35 am ET
1min read

Corporate Bitcoin treasuries have become a trend under Strategy’s success, but an SEC lawsuit filing could place other firms in the regulator’s crosshairs.

Strategy, formerly

, has been hit with a class-action lawsuit over alleged misleading statements tied to its Bitcoin strategy. The May 19 Lawsuit filing claims Strategy hid the associated risks, citing a $5.9 billion unrealized Q1 loss that triggered an 8.67% drop in shares during April 7 trading. The “anticipated profitability” and “risks associated with Bitcoin’s volatility” were referenced as misrepresented by Strategy officials.

One focal point is the company’s repeated emphasis on key performance indicators like BTC Yield—tracking the ratio between Bitcoin holdings and common shares outstanding. These metrics allegedly downplayed the risks tied to adopting a fair-value accounting model for its Bitcoin reserves. Strategy chairman Michael Saylor, president and CEO Phong

, and executive vice president and chief financial officer Andrew Kang are all defendants in the suit.

As of May 18, Strategy holds 576,230 BTC acquired for around $40.2 billion at an average price of $69,726 per coin. At current prices, the company’s total holdings are valued at more than $59.2 billion, representing an unrealized gain of $19.2 billion, or 47%. Since the filing, Strategy continues to acquire Bitcoin with its latest 7,390 BTC purchase valued at $764.9 million.

Commentators fear the Strategy lawsuit could set a precedent for broader enforcement, posing a threat to corporate Bitcoin treasuries. Pseudonymous X analyst Vagada noted that the lawsuit could “test the legal frontier” of corporate Bitcoin adoption. Others, however, argue the suit lacks merit. Pseudonymous developer 0xngmi from DeFiLlama criticized the case in a May 19 X post. He dismissed claims of understated risks, stating, “You’re buying a company that is self-labelled as ‘leverage on Bitcoin,’ what do you expect?”

Summary: The class-action lawsuit against Strategy, formerly MicroStrategy, alleges that the company misrepresented the risks associated with its Bitcoin strategy. The lawsuit claims that Strategy hid the risks tied to adopting a fair-value accounting model for its Bitcoin reserves and downplayed the potential for significant losses. The lawsuit could set a precedent for broader enforcement, posing a threat to corporate Bitcoin treasuries.

Analysis: The lawsuit against Strategy highlights the risks associated with corporate Bitcoin treasuries. The company’s emphasis on key performance indicators like BTC Yield may have downplayed the risks tied to adopting a fair-value accounting model for its Bitcoin reserves. The lawsuit could set a precedent for broader enforcement, posing a threat to corporate Bitcoin treasuries. However, some commentators argue that the suit lacks merit and that the risks associated with corporate Bitcoin treasuries are well-known.

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