Legal Uncertainty Looms as Strategy Faces Bitcoin Fraud Lawsuits

Key Takeaways:

• At least 7 law firms have filed complaints against Strategy for securities fraud
• Lawsuits allege the company overstated profitability and understated risks from Bitcoin investments
• Strategy recorded $5.9 billion loss on digital assets in Q1 2025
• Legal experts have differing views on the prospects of the lawsuits
• Strategy continues Bitcoin accumulation strategy despite legal pressure

The securities fraud lawsuits facing Michael Saylor’s company Strategy could take years to resolve, if they lead to anything at all, according to legal experts.

Strategy, formerly MicroStrategy, pioneered the use of Bitcoin (BTC) as a reserve asset for corporate treasuries. The company has been making regular Bitcoin purchases since 2020, with over 601,550 BTC on its balance sheets and no plans to cap the accumulation.

Currently, Strategy is facing questions from investors about its cryptocurrency approach. As of mid-July, at least seven law firms have filed complaints against Strategy. The lawsuits accuse Strategy of overstating Bitcoin profits while downplaying volatility and downside risks, especially under new accounting rules, as well as the magnitude of losses the company could recognize following the adoption of ASU 2023-08 accounting principles.

During the first three months ended March 31, 2025, the company recorded an unrealized fair value loss on digital assets of $5.9 billion.

In an interview, crypto lawyer Tyler Yagman, an associate at The Ferraro Law Firm, said the securities dispute could become a “multi-year process.” “What we see […], many times these class actions are filed, they end up floundering and not going anywhere.”

‘Zealous Plaintiffs Firms Looking for a Hook to Latch Onto’

At least one claim mentions Strategy’s 8.7% share price drop on April 7. That drop was preceded by the disclosure of a nearly $6 billion unrealized loss on the company’s digital assets. The disclosure occurred in an 8-K filing to the SEC, wherein Strategy wrote: “[w]e may not be able to regain profitability in future periods, particularly if we incur significant unrealized losses related to our digital assets.”

Brandon Ferrick, general counsel for Web3 infrastructure company Duoro Labs, labeled the legal cases as “extremely common,” noting that investment disclosures “are very hard to get right, especially in nascent industries like crypto.”

“Plaintiffs are alleging that profitability was overstated and that risks were understated — not that these things were entirely absent from disclosures. It’s just zealous plaintiffs firms looking for a hook to latch onto.”

The class action lawsuits have not stopped Strategy from continuing its Bitcoin (BTC) accumulation. On Monday, the company bought another $472 million worth of BTC. On Thursday, it hit an all-time high market capitalization, news that Strategy executive chairman Michael Saylor shared on X.

“There are obviously hurdles that these class action firms are going to have to overcome, and that remains to be seen.”

Law firms involved in complaints against Strategy include Pomerantz LLP, Robbins Geller Rudman & Dowd LLP, Glancy Prongay & Murray LLP, The Schall Law Firm, Kessler Topaz Meltzer & Check LLP and Bronstein, Gewirtz and Grossman LLC, among others.

Transparency Key for Crypto Treasury Companies

The crypto space has entered a new era with the launch of Bitcoin exchange-traded funds (ETFs) in January 2024, with growing institutional capital entering the industry. As a result, investor demand for transparency around corporate crypto holdings is rising, according to Yagman.

“We’re now seeing an emergence of crypto-based treasury companies that operate like actively managed ETFs, but in a company structure […],” he said, adding that “management teams need to be as transparent as humanly possible and as direct as humanly possible, because you’re dealing with a market segment that is known to be volatile.”

With billions in unrealized losses and growing legal pressure, all eyes are now on Strategy’s Q2 earnings release on July 31, according to the company’s website. Analysts surveyed by TipRanks expect an earnings per share (EPS) of -0.10, following the company’s EPS of -16.53 in Q1, significantly below previous quarter expectations.