MicroStrategy Class Action Lawsuit: Securities Fraud and Preferred Stock Cases

MicroStrategy, now operating as Strategy, has faced two class action lawsuits in recent years: a 2025 federal securities fraud case in Virginia tied to its Bitcoin treasury strategy, and a 2025 Delaware shareholder suit over changes to its preferred stock. Both ended without a ruling on the merits. The securities fraud case was voluntarily dismissed with prejudice in August 2025, and the Delaware case ended in a stipulated dismissal in March 2026 that required the company to seek stockholder ratification of the disputed amendment and pay $550,000 in plaintiff’s attorneys’ fees.

The 2025 Securities Fraud Case

Shareholder Anas Hamza filed the complaint on May 16, 2025, in the U.S. District Court for the Eastern District of Virginia, Case No. 1:25-cv-00861. The named defendants were MicroStrategy, Executive Chairman Michael Saylor, CEO Phong Le, and CFO Andrew Kang. The proposed class covered investors who bought MicroStrategy securities between April 30, 2024, and April 4, 2025, and the suit alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.¹

At the center of the complaint was a new accounting rule, FASB ASU 2023-08, which took effect for fiscal years beginning after December 15, 2024. The rule requires companies to measure cryptocurrency holdings at fair value each period, so unrealized gains and unrealized losses now flow through the income statement. Under the prior rule, companies could only write Bitcoin down, never up.²

The suit also cited the company’s “21/21 Plan,” announced in October 2024, which set a target of raising $42 billion over three years to buy more Bitcoin, and a projected $10 billion “BTC $ Gain” for 2025, as examples of misleadingly optimistic guidance. A separate count alleged the company violated SEC Regulation S-K by failing to disclose known trends or uncertainties tied to the new accounting framework.¹

The April 2025 Disclosure

The alleged corrective disclosure came on April 7, 2025, when MicroStrategy filed an SEC report revealing a $5.91 billion unrealized loss on its digital assets for the first quarter of 2025. The filing warned investors the company “may not be able to regain profitability in future periods.” The stock fell $25.47 per share that day, closing at $268.14, a decline of roughly 8.67%.¹

At the time of the filing, MicroStrategy held 528,185 bitcoins with a reported value of $43.55 billion. The company had spent about $7.66 billion acquiring 80,715 coins during the first quarter, and a 12% drop in Bitcoin’s price over the period drove most of the unrealized loss.⁴

How the Case Ended

The case never reached a ruling on the merits. On August 28, 2025, the lead plaintiffs filed a notice of voluntary dismissal with prejudice, meaning the named plaintiffs cannot bring the same claims again. The matter had been assigned to Judge Anthony J. Trenga.⁵ According to Bloomberg Law, the dismissal applied specifically to the named plaintiffs’ claims rather than to the claims of absent class members, though no other plaintiffs have pursued the matter.⁶

The Delaware Preferred Stock Class Action

A separate class action, unrelated to the securities fraud claims, was filed in the Delaware Court of Chancery on July 21, 2025, by shareholder David Dodge. The suit challenged amendments MicroStrategy made to the terms of its 8.00% Series A Perpetual Strike Preferred Stock, known as STRK.⁷

The STRK amendment, filed July 7, 2025, changed the stock’s liquidation preference. Instead of a fixed $100 per share, the preference would track the trading price, with a $100 floor.⁸ Dodge alleged that common stockholders were entitled to vote on the change under Section 242 of the Delaware General Corporation Law, and that the board breached its fiduciary duties by adopting the amendment without that vote. The complaint sought a declaration that the amendment was ineffective and an order requiring MicroStrategy to file a certificate of correction invalidating it.⁷

MicroStrategy and its board denied the allegations in an answer filed September 29, 2025. The parties entered a stipulated dismissal on March 12, 2026. Under the agreement, MicroStrategy agreed to seek stockholder ratification of the STRK amendment under Section 204 of the DGCL at its next annual meeting and to pay $550,000 in the plaintiff’s attorneys’ fees and expenses. The dismissal was with prejudice as to Dodge but without prejudice as to other potential class members. As of the company’s most recent SEC filings, the ratification vote had not yet occurred, and the company advised investors to treat the STRK amendment as still subject to that process.⁹

The Earlier Accounting Fraud Case

The 2025 cases were not MicroStrategy’s first encounter with securities fraud litigation. In 2000, the SEC brought an enforcement action against the company and three executives, including co-founder Michael Saylor, alleging that MicroStrategy materially overstated revenues and earnings from 1998 through early 2000 by recognizing revenue prematurely on software deals. When the company announced the need for a restatement in March 2000, its stock dropped from $260 to $86 in a single day.¹⁰

The SEC case settled in December 2000 without any admission of wrongdoing. Saylor paid $8.28 million in disgorgement plus a $350,000 civil penalty. COO Sanjeev Bansal and CFO Mark Lynch together paid $1.77 million in disgorgement and $350,000 each in civil penalties, and Lynch was barred from practicing as an accountant before the SEC for three years. The company was ordered to adopt governance reforms, including creation of an internal audit department.¹¹

Shareholders separately pursued a class action, In re MicroStrategy, Inc. Securities Litigation, in the same Eastern District of Virginia court. MicroStrategy settled the shareholder claims for consideration valued between $98.5 million and $137.5 million, paid through notes, stock, and warrants. Auditor PricewaterhouseCoopers separately paid approximately $55 million in cash to resolve its own liability.¹²

1
Bernstein Liebhard LLP. Hamza v. MicroStrategy Incorporated, Complaint
2
Grant Thornton. MicroStrategy (MSTR) Securities Class Action Lawsuit Update
4
CFO Dive. Strategy Reports Unrealized $5.91B Loss on Digital Assets
5
Kessler Topaz Meltzer & Check LLP. MicroStrategy Incorporated d/b/a Strategy
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Bloomberg Law. Strategy Investors Drop Suit Over Crypto Accounting Change Hit
7
SEC. MicroStrategy Form 8-K, July 2025
8
CCN. MicroStrategy Sued Over Preferred Stock Amendment
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SEC. MicroStrategy Form 10-K Filing, February 2026
10
SEC. SEC Press Release 2000-186
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SEC. SEC Litigation Release No. 16829
12
CaseMine. In re MicroStrategy, Inc. Securities Litigation, Civil Action No. 00-473-A