MicroStrategy and Michael Saylor sued by District of Columbia for evading taxes over a decade

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Wash­ing­ton, D.C., for­mal­ly known as the Dis­trict of Colum­bia (DC), is suing MicroS­trat­e­gy Inc. founder and exec­u­tive chair­man Michael Say­lor for tax fraud, alleg­ing the Bit­coin evan­ge­list failed to pay tax­es for more than a decade that he has lived there. 

In a series of state­ments on his ver­i­fied Twit­ter han­dle, DC Attor­ney Gen­er­al Karl A. Racine Wednes­day said his office is also suing MicroS­trat­e­gy — which holds the most Bit­coin in its trea­sury of all pub­lic com­pa­nies list­ed in the U.S. — for alleged­ly con­spir­ing to help Say­lor evade these taxes.

Forkast’s request for a com­ment to MicroS­trat­e­gy sent via email out­side of nor­mal U.S. busi­ness hours was unan­swered at the time of publication.

Say­lor is accused of using an “elab­o­rate scheme” to dodge pay­ing tax­es in DC between 2014 and 2022 by claim­ing to be a res­i­dent of Flori­da — a state that has no income tax­es, accord­ing to a press release put out by the AG’s office.

For tax pur­pos­es, D.C. counts indi­vid­u­als who have homes in the Dis­trict where they intend to remain or to return to after any absences, and indi­vid­u­als who main­tain a res­i­dence in the Dis­trict for at least 183 days dur­ing the year as residents.

Racine’s office believes Say­lor resided in DC for at least 183 days of any giv­en year and is there­fore liable to pay tax­es in the jurisdiction.

As a result, the AG’s office alleges Say­lor neglect­ed to pay more than US$25 mil­lion in tax­es dur­ing this time, and that MicroS­trat­e­gy assist­ed Say­lor to do so by fil­ing false state­ments with his Flori­da res­i­dence listed.

Racine is seek­ing to recov­er more than US$100 mil­lion from both par­ties to cov­er the short­fall in tax­es and penal­ties that have accrued over the years. 

“Although MicroS­trat­e­gy is based in Vir­ginia, Flori­da is where I live, vote and have report­ed for jury duty, and it is at the cen­ter of my per­son­al and fam­i­ly life,” Say­lor said in a state­ment released Wednes­day. “I respect­ful­ly dis­agree with the posi­tion of the Dis­trict of Colum­bia, and look for­ward to a fair res­o­lu­tion in the courts.”

Mean­while, MicroS­trat­e­gy has denied any involve­ment in the case, call­ing the issue “a per­son­al tax mat­ter involv­ing Mr. Saylor.”

“The Com­pa­ny was not respon­si­ble for his day-to-day affairs and did not over­see his indi­vid­ual tax respon­si­bil­i­ties,” MicroS­trat­e­gy said in a state­ment. “Nor did the Com­pa­ny con­spire with Mr. Say­lor in the dis­charge of his per­son­al tax respon­si­bil­i­ties. The Dis­trict of Columbia’s claims against the Com­pa­ny are false.” 

Racine also said this is the first law­suit brought under DC’s recent­ly amend­ed False Claims Act, which encour­ages whistle­blow­ers to report res­i­dents who vio­late the district’s tax laws by mis­rep­re­sent­ing their residence. 

The case was first brought to the atten­tion of the AG’s office by whistle­blow­ers in April 2021, who orig­i­nal­ly sought to sue Say­lor for tax fraud.

In April 2021, whistle­blow­ers rep­re­sent­ed by Cad­walad­er, Wick­er­sham & Taft, filed a law­suit against Say­lor alleg­ing he had failed to pay tax­es over a peri­od of time. After inde­pen­dent­ly review­ing the alle­ga­tions the AG inter­vened and filed its own com­plaint against Say­lor and MicroStrategy.

“D.C. res­i­dents and their employ­ers are now on notice that attempts to evade the District’s income tax laws by false­ly claim­ing that they reside in anoth­er juris­dic­tion will be inves­ti­gat­ed and, if sub­stan­ti­at­ed, held account­able,” Racine said in a statement.

Say­lor rose to promi­nence in the cryp­to com­mu­ni­ty by being an out­spo­ken pro­po­nent of Bit­coin and shift­ing a large part of MicroStrategy’s busi­ness strat­e­gy to Bit­coin acqui­si­tion, with the com­pa­ny now hold­ing about 130,00 BTC val­ued at approx­i­mate­ly US$2.6 bil­lion at cur­rent prices.

He recent­ly stepped down from his role as chief exec­u­tive offi­cer to become exec­u­tive chair­man and focus on Microstrategy’s Bit­coin strat­e­gy, and oth­er advo­ca­cy initiatives.

The U.S. Secu­ri­ties and Exchange Com­mis­sion (SEC) had pre­vi­ous­ly accused Say­lor of fraud along with two oth­er MicroS­trat­e­gy offi­cials in 2000 for alleged­ly report­ing prof­its when the com­pa­ny was actu­al­ly los­ing money.

Say­lor set­tled the civ­il charges with­out admit­ting or deny­ing them and agreed to pay share­hold­ers US$8.3 mil­lion along with a fine of US$350,000 to the SEC.

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