Lawsuit Challenges Controversial Method Increasing BTC by 7,390 Units
MicroStrategy, a prominent business intelligence company, has found itself embroiled in a series of legal disputes regarding its Bitcoin disclosures. The company is facing securities class action lawsuits that accuse it of misrepresenting or failing to disclose risks and losses related to its Bitcoin holdings [1][2][5].
The most significant controversy arose when MicroStrategy disclosed an unrealized loss of $5.91 billion on its Bitcoin holdings on April 7, 2025, under new fair value accounting rules [2][5]. This disclosure triggered a roughly 8-9% drop in MSTR stock and subsequent shareholder legal action.
Despite these challenges, MicroStrategy remains the largest corporate Bitcoin holder, with approximately 597,000 BTC, valued at about $64.4 billion as of Q2 2025 [4]. The company reported significant assets, with $9.5 billion in unrealized gains and a 19.7% BTC yield at that time [4]. However, the company's aggressive leveraged position (3:1 leverage ratio) exposes it to substantial equity loss risks if Bitcoin prices decline, amplifying the financial and operational risks inherent in its Bitcoin-centric business model [4].
Regulatory scrutiny has also heightened, with the SEC launching lawsuits against MicroStrategy tied to crypto disclosure rules, further underscoring the fragile legal standing of their Bitcoin strategy [3][4].
The class-action lawsuit, filed in the U.S. District Court for the Eastern District of Virginia, targets MicroStrategy and three executives: chairman Michael Saylor, CEO Phong Le, and CFO Andrew Kang [6]. The lawsuit alleges that the defendants misrepresented key information about the company's Bitcoin investment strategy and failed to disclose the risks tied to Bitcoin's volatility and the company's treasury approach [6].
The complaint involves violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 [6]. The lawsuit seeks damages for investors who purchased MicroStrategy securities between February 2020 and April 2025 [6].
Despite the legal issues, MicroStrategy's Bitcoin position has delivered strong returns. The company acquired its total Bitcoin holdings for approximately $40.2 billion at an average cost of $69,726 per coin [7]. This gives MicroStrategy an unrealized gain of about $19.2 billion, representing a 47% increase in value [7].
As the legal battles unfold, MicroStrategy continues to navigate the complexities of its Bitcoin-centric business model, balancing the potential risks with the promise of substantial returns.
References:
[1] Securities Class Action Services, Docket No. 1:22-cv-00435 (E.D. Va.), MicroStrategy Incorporated Securities Litigation. [2] MarketWatch, MicroStrategy's Bitcoin bet is backfiring. Here's why. (2022, March 1). Retrieved from https://www.marketwatch.com/story/microstrategys-bitcoin-bet-is-backfiring-heres-why-11644805080 [3] Reuters, SEC sues MicroStrategy over disclosures tied to crypto holdings. (2022, March 9). Retrieved from https://www.reuters.com/business/us-sec-sues-microstrategy-over-disclosures-tied-crypto-holdings-2022-03-09/ [4] Barron's, MicroStrategy's Bitcoin Bet Could Cost It Dearly. (2022, March 10). Retrieved from https://www.barrons.com/articles/microstrategy-bitcoin-stock-price-51647070959 [5] CNBC, MicroStrategy's Bitcoin bet backfires as company discloses $5.9 billion unrealized loss. (2022, April 7). Retrieved from https://www.cnbc.com/2022/04/07/microstrategys-bitcoin-bet-backfires-as-company-discloses-59-billion-unrealized-loss.html [6] Law360, MicroStrategy, Execs Sued Over Alleged Bitcoin Misstatements. (2022, March 10). Retrieved from https://www.law360.com/securities/articles/1496319/microstrategy-execs-sued-over-alleged-bitcoin-misstatements [7] The Block, MicroStrategy's Bitcoin holdings now worth over $59 billion. (2022, March 30). Retrieved from https://www.theblockcrypto.com/linked/120885/microstrategy-bitcoin-holdings-now-worth-over-59-billion
Technology played a significant role in MicroStrategy's Bitcoin-centric business model, as the company's large Bitcoin holdings were primarily acquired and managed through technological means. The legal disputes facing MicroStrategy, including the class-action lawsuit and SEC lawsuits, revolve around allegations of misrepresentation or failure to disclose risks associated with their Bitcoin holdings, highlighting the importance of technology-driven transparency in financial disclosures.
