Prior to its adoption of ASU 2023-08, rather than employing a fair value accounting methodology, Strategy accounted for its bitcoin under a cost-less-impairment accounting model, whereby the Company classified its large bitcoin holdings as intangible assets.  Under this accounting model, Strategy only needed to recognize impairments in the event of price depreciations and would not mark up for price increases unless the assets were sold.

While Defendants advised investors throughout the Class Period that they expected Strategy’s adoption of ASU 2023-08 to materially impact its financial statements, Defendants failed to disclose the particular nature or scope of the expected impact while downplaying the attendant risks.  Indeed, Defendants consistently provided rosy assessments of Strategy’s performance as a bitcoin treasury company following its adoption of ASU 2023-08.  They did this, in part, by reporting and projecting positive BTC Yield, BTC Gain, and BTC $ Gain results, while omitting the immense losses the Company could realize on its bitcoin assets after accounting for these assets under a fair value accounting methodology.

The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding Strategy’s business, operations, and prospects.  Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the anticipated profitability of the Company’s bitcoin-focused investment strategy and treasury operations was overstated; (ii) the various risks associated with bitcoin’s volatility and the magnitude of losses Strategy could recognize on the value of its digital assets following its adoption of ASU 2023-08 were understated; and (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times.