MicroStrategy Violated SEC Rules on BTC Purchases

MicroStrategy, which has become popular with its heavy investments in Bitcoin, violated the rules of the US Securities and Exchange Commission (SEC) in BTC purchases. According to the U.S. Securities and Exchange Commission, MicroStrategy did not meet the required accounting requirements for cryptocurrency purchases. According to the report, MicroStrategy was reporting its financial details using these accounting principles to calculate the amount of Bitcoin purchases. However, the company did not include "the effect of share-based compensation expense and impairment losses and sales gains on intangible assets" in the calculations. MicroStrategy invests heavily in Bitcoin. As of December 30, 2021, the company had purchased 124,391 BTC ($4.7 billion). MicroStrategy did not take into account “cumulative impairment losses” when calculating the cost and based the value of BTC holdings on the prevailing market price on the last day of each period. The company reported these acquisitions using non-GAAP policies. MicroStrategy said it "believes these non-GAAP financial measures are also useful for investors and analysts to consistently compare performance across reporting periods." According to the SEC, MicroStrategy needs to make the necessary changes and de-adjust in its future filings so that Bitcoin purchases will reflect market activity and changes in BTC price over time.

MicroStrategy Shares Lose Value

The latest report released by the SEC coincides with the time when Bitcoin is facing a high level of volatility. BTC recently dropped to $35,000. Shares of MicroStrategy also lost value due to its investments in Bitcoin. MicroStrategy's share price fell 17.84% to trade at $375, a six-month low. Bitcoin's current price is also at a six-month low and almost 50% below its all-time high.