FameEX Hot Topics | Strategy Sued in Class Action Over Allegedly Misleading Bitcoin Claims

Strategy has disclosed in a May 19 filing with the U.S. Securities and Exchange Commission (SEC) that it is facing a class-action lawsuit in the U.S. District Court for the Eastern District of Virginia. The lawsuit alleges that the company and its senior executives misled investors about the nature and risks of its Bitcoin investment strategy. According to the filing, the plaintiffs claim Strategy failed to provide full and accurate disclosures regarding the expected profitability and the inherent volatility of its Bitcoin holdings.

The defendants named in the suit include Strategy Chairman Michael Saylor, President and CEO Phong Le, and Executive Vice President and CFO Andrew Kang. They are accused of violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, which addresses fraud and material misstatements in public company disclosures. The complaint centers on the allegation that the executives made false or misleading statements or omitted key facts about the company's Bitcoin-centric treasury operations.

Specifically, the lawsuit argues that Strategy did not adequately inform shareholders of the potential downside risks of their Bitcoin-focused strategy. Given Bitcoin's well-known price volatility, the plaintiffs assert that more transparent communication was required to allow investors to make informed decisions. The case highlights growing scrutiny around how companies portray crypto-related investments to shareholders, particularly when such strategies are central to their financial identity.

However, some in the crypto community have pushed back against the claims. 0xngmi, a pseudonymous developer affiliated with DeFi analytics platform DefiLlama, called the lawsuit groundless. In a May 19 post on social platform X, he said, “You’re buying a company that is self-labelled as ‘leverage on Bitcoin,’ what do you expect?” He argued that Strategy’s risk profile has been evident all along and that the firm was not hiding the downside potential.

Despite the lawsuit, Strategy’s Bitcoin-centric model continues to inspire imitators. Last week, luxury watchmaker Top Win surged over 60% in premarket trading after adopting a Bitcoin accumulation strategy and rebranding as AsiaStrategy. It partnered with Sora Ventures, previously linked with Japan’s Metaplanet. In Bahrain, a catering firm also embraced Bitcoin, showing growing corporate adoption despite legal uncertainties.

Disclaimer: The information provided in this section is for reference only and does not represent any investment advice or the official views of FameEX.