A New York law firm has thrown a legal gauntlet at MicroStrategy, the company that famously went all-in on bitcoin. Pomerantz LLP, a firm known for its class-action suits, claims MicroStrategy misled investors about the true performance of its bitcoin holdings. This isn’t just about a stock price dip; it’s about how the company accounted for its digital assets and what it told the public about the risks involved.
- The lawsuit alleges MicroStrategy misrepresented its bitcoin strategy, particularly regarding its accounting practices. The firm is accused of painting a more positive picture than the financial realities supported.
- At the heart of the case is a change in accounting standards (ASU 2023-08) that required fair market value reporting for crypto assets. Pomerantz argues the company didn’t fully disclose the impact of this change.
- The lawsuit highlights a $5.9 billion unrealized loss reported in Q1 2025, which coincided with a stock price drop. Investors who bought stock between April 30, 2024, and April 4, 2025, have until July 15 to join the class-action suit.
The lawsuit, filed in Virginia, covers a specific period: from April 30, 2024, to April 4, 2025. Pomerantz is essentially saying that during this time, MicroStrategy painted a rosier picture of its bitcoin strategy than the numbers actually supported. They allege the company overstated profits while downplaying the inherent ups and downs of holding bitcoin, making its public statements “materially false and misleading.”
The Accounting Shift
At the heart of this legal dust-up is a change in how MicroStrategy reports its crypto. The company adopted new accounting standards, specifically ASU 2023-08. This new rule requires companies to account for crypto assets at their fair market value. Before this, MicroStrategy used a different method, one that mainly recognized losses when the price dropped but didn’t mark up assets for price increases until they were actually sold.
Pomerantz argues that MicroStrategy didn’t quite lay out the full impact of this accounting switcheroo. They claim the company failed to properly disclose the exact nature or scope of how these new standards would affect its financial statements. All the while, the firm suggests, MicroStrategy was busy playing down the risks that came with holding such a volatile asset.
The law firm pointed to statements from the company, suggesting that MicroStrategy offered “rosy assessments” after adopting the new accounting rules. According to Pomerantz, this included reporting positive figures for things like “BTC Yield” and “BTC Gain.” But, the firm alleges, these reports conveniently left out the significant losses the company could face when its bitcoin assets were valued at current market prices.
Unrealized Losses Surface
The lawsuit specifically highlights a $5.9 billion unrealized loss that MicroStrategy reported in the first quarter of 2025. This figure stemmed directly from the adoption of ASU 2023-08, which forced the company to recognize the paper losses on its vast bitcoin holdings. News of this substantial unrealized loss coincided with a drop of over 8% in MicroStrategy’s stock price.
It’s worth remembering that MicroStrategy, formerly known just as MicroStrategy, started its bitcoin accumulation journey back in 2020. Since then, it has become the undisputed heavyweight champion among publicly traded companies when it comes to holding bitcoin. Their current stash? A cool 597,325 BTC. That’s a lot of digital coins.
This bold strategy has paid off handsomely in terms of stock performance. MicroStrategy’s stock has seen a remarkable surge, climbing over 3,300% in the last five years. This success has even inspired other companies, like Metaplanet, to follow a similar path, betting big on bitcoin as a corporate treasury asset. Just recently, MicroStrategy’s stock closed up nearly 8%, trading around $402.28.
The Road Ahead
The allegations from Pomerantz LLP paint a picture of a company that may have oversold its bitcoin strategy to investors. By allegedly downplaying the risks and not fully disclosing the impact of new accounting rules, the firm suggests MicroStrategy may have violated federal securities laws. This is a serious charge, and it will be interesting to see how MicroStrategy responds.
The case is now in the Eastern District Court of Virginia. For any investors who bought MicroStrategy stock between April 30, 2024, and April 4, 2025, there’s a deadline: July 15. That’s the date by which they can join this class-action suit. It’s a stark reminder that even in the fast-paced world of crypto-adjacent investments, the old rules of disclosure and transparency still apply. We’ve reached out to MicroStrategy for their take on these claims, but as of now, they haven’t commented.
