MicroStrategy, the enterprise analytics firm turned Bitcoin whale, is under a new class action lawsuit that alleges the company and its top executives misled investors about the risks and profitability of its aggressive Bitcoin investment strategy. The legal action comes in the wake of a staggering $5.91 billion loss reported for the first quarter of 2025, sending shockwaves through both Wall Street and the crypto community.

Key Allegations:

The lawsuit, filed in the U.S. District Court for the Eastern District of Virginia, targets MicroStrategy (also known as Strategy), Executive Chairman Michael Saylor, CEO Phong Le, and CFO Andrew Kang. Plaintiffs claim that from April 30, 2024, to April 4, 2025, the company overstated the anticipated profitability of its Bitcoin-focused treasury operations and failed to adequately disclose the significant risks associated with Bitcoin’s notorious volatility and the impact of new accounting rules.

According to the complaint, MicroStrategy executives promoted their Bitcoin strategy using custom performance metrics such as “BTC Yield” and “BTC $ Gain” to paint a positive picture for investors. However, the company allegedly did not warn shareholders about the full extent of potential losses that could result from the adoption of new accounting standards (ASU 2023-08), which require companies to recognize the fair value of their crypto assets each quarter, including unrealized losses.

Q1 2025 Losses Exposed

On April 7, 2025, MicroStrategy revealed in an SEC filing that it had recognized a $5.91 billion unrealized loss on its Bitcoin holdings for the first quarter, driven by a significant drop in Bitcoin prices. The company warned investors that it “may not be able to regain profitability in future periods, particularly if we incur significant unrealized losses related to our digital assets.” This bombshell disclosure triggered an 8.67% drop in MicroStrategy’s stock price, closing at $268.14 per share that day.

Legal Action

The fallout has been swift. Investors allege that MicroStrategy’s optimistic public statements masked the true risks of its Bitcoin-centric approach, especially under the new accounting regime. The lawsuit seeks damages for all shareholders who acquired MicroStrategy securities during the class period, with a deadline of July 15, 2025, to seek appointment as lead plaintiff.

Despite the massive loss and mounting legal pressure, MicroStrategy shows no signs of retreating from its Bitcoin strategy. The company has announced plans to raise an additional $21 billion for more Bitcoin purchases, even as its software division faces declining revenues.

MicroStrategy has stated its intention to “robustly contest these allegations,” but with investor confidence shaken and regulatory scrutiny intensifying, the outcome of this high-profile case could have far-reaching implications for both the company and the broader trend of corporate Bitcoin adoption.