A class action lawsuit was filed against Strategy, Inc. (MSTR) by Levi & Korsinsky on May 16, 2025. The plaintiffs (shareholders) alleged that they bought MSTR stock at artificially inflated prices between April 30, 2024 and April 4, 2025 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Strategy stock during that period can click here to learn about joining the lawsuit.
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Strategy is a technology company offering business intelligence, mobile software, and cloud-based services. Two years ago, founder and CEO Michael Saylor announced that the company had shifted its long-term business strategy to buying and holding cryptocurrency, Bitcoin, in its treasury. Additionally, Strategy stated that it would use the proceeds from equity and debt financings, as well as cash flows from its operations, to accumulate Bitcoin, which would then serve as its primary treasury reserve asset.
The company’s claims about its bitcoin-focused investment strategy and treasury operations are at the heart of the current complaint.
Strategy’s Misleading Claims
According to the lawsuit, Strategy and three of its senior officers and/or directors (the Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about expectations regarding profitability of Strategy’s bitcoin-focused investment strategy and treasury operations from SEC filings and related material.
During the Class Period, the company’s Executive Chairman stated that Strategy aims to outperform Bitcoin’s market performance by leveraging the volatility in its price. Additionally, the company uses the issuance of convertible bonds to offset market fluctuations.
Additionally, in a quarterly report dated May 1, 2024, the company mentioned that its decision to adopt ASU 2023-08 will likely have a material impact on its financial results in future periods, increase the volatility of its financial results, and affect the carrying value of Bitcoin on MSTR’s balance sheet. Also, there could be adverse tax consequences, which in turn could have a material negative impact on the company’s financial results and the market price of its class A common stock.
Notably, ASU 2023-08, issued by the Financial Accounting Standards Board (FASB), is an accounting standard update that requires companies to record crypto assets at fair value, with changes in fair value recognized in net income for each reporting period.
Finally, in an August 1, 2024, press release, MSTR’s CEO stated that the company held 226,500 bitcoins in its treasury, reflecting a current market value 70% higher than its cost basis. Moreover, the company remained laser-focused on its Bitcoin development strategy and intended to continue achieving positive “BTC Yield.” Strategy introduced BTC Yield as a new KPI, targeting 4%-8% annually over each of the next three years.
However, subsequent events (mentioned below) reveal that the defendants failed to inform investors about the magnitude of losses Strategy could recognize on the value of its digital assets following its adoption of ASU 2023-08.
Plaintiffs’ Arguments
The plaintiffs maintain that the defendants deceived investors by lying and withholding critical information about the business practices and prospects during the Class Period. Importantly, the defendants are accused of misleading investors about the impact of adoption of ASU 2023-08 on the company’s financial performance.
The information became clear on April 7, 2025, when the company disclosed in a regulatory filing that it had recognized a $5.91 billion unrealized loss on digital assets for Q1FY25. This was mainly due to the adoption of ASU 2023-08 in January 2025, which introduced new rules for recording crypto assets. Strategy further mentioned that the large unrealized loss was expected to result in a net loss for the first quarter.
Moreover, the company warned investors that it may be unable to regain profitability in future periods, depending on whether it records significant unrealized losses related to digital assets. Following the news, MSTR stock fell 8.7% the same day and dropped a further 11.3% on April 8.
To conclude, the defendants misled investors about the anticipated profitability of the company’s Bitcoin-focused investment strategy and treasury operations. Despite these issues, MSTR stock has gained 27.7% year-to-date.
