Michael Saylor’s crypto-centric company, now rebranded as Strategy (formerly MicroStrategy), is under legal fire once again. A new class action lawsuit filed in the Eastern District of Virginia (Docket No. 25-cv-00861) accuses the firm of misleading investors about the risks of its aggressive Bitcoin investment strategy, which led to an unrealised loss of $5.91 billion.

The lawsuit covers investors who purchased Strategy securities between April 30, 2024, and April 4, 2025, claiming that the company violated federal securities laws by making false or misleading statements related to its crypto exposure and risk management. As the firm grapples with one of the largest corporate crypto-related losses in history, investors are now seeking damages for what they allege was deliberate stock manipulation and risk deception.

Bitcoin Loss and New Accounting Standards

The key issue centres around new accounting rules that came into effect on January 1, 2025, known as ASU 2023-08, which require fair value reporting of digital assets including both unrealised gains and losses. Under this updated standard, companies like Strategy must now reflect changes in their crypto holdings in their quarterly earnings.

On April 7, 2025, Strategy revealed a staggering $5.91 billion unrealised loss linked to its Bitcoin holdings. This announcement triggered a sharp drop in the company’s stock price by $25.47 per share (8.67%), landing it at $268.14. Strategy also warned in its filings that it “may not be able to regain profitability in future periods” if significant unrealised losses continue.

The lawsuit claims that Strategy failed to adequately prepare shareholders for this risk, despite being aware of the accounting changes for months in advance.

Stock Fraud and Crypto Manipulation Allegations

At the core of the lawsuit are allegations that Strategy engaged in crypto stock manipulation by overstating profitability while downplaying the volatility and risk associated with Bitcoin investments. Plaintiffs argue the company gave overly optimistic assessments using internal metrics such as “BTC Yield” and “BTC Gain”, while deliberately omitting the potential downside under the fair value model.

The complaint further alleges that Strategy’s executives knowingly misrepresented the financial health of the firm and created an illusion of profitability, even as crypto prices fluctuated dramatically. By failing to disclose the implications of the new accounting standards and their likely impact on earnings, the company is accused of violating investor trust and breaching federal disclosure laws.

Investor Action Deadline and Industry Implications

Investors have until July 15, 2025, to file as lead plaintiffs in the class action. The outcome of this lawsuit could set a significant precedent for how public companies holding crypto must account for and communicate, their digital asset risks moving forward.

Legal experts and market analysts are closely watching the case. If Strategy is found liable, it may lead to stricter disclosure standards for firms involved in crypto investments, particularly as regulatory frameworks for digital assets continue to evolve.

For Strategy, the lawsuit adds to a growing list of legal troubles and raises fresh concerns over the long-term sustainability of its Bitcoin-first business model. While Michael Saylor has long championed Bitcoin as a superior store of value, the legal and financial fallout from this loss may now test the very foundation of that vision.

Crypto Risk Transparency Under Scrutiny

As Bitcoin matures in mainstream finance, so too does the scrutiny facing companies that embrace it. The Strategy class action lawsuit underscores the growing demand for transparency and accountability from firms with large crypto holdings. With accounting standards tightening and investor protection laws gaining ground, the era of crypto-led corporate optimism without full disclosure may be nearing its end.

Investors and crypto companies alike will be watching this case closely, not just for the financial outcome, but for what it signals about the future intersection of crypto, corporate governance, and regulation.