MicroStrategy, Michael Saylor Sued for Tax Fraud by DC Attorney General

By Andrew Hayward

Washington, DC, Attorney General Karl Racine today announced that he is filing civil charges against cloud computing software company MicroStrategy and its founder Michael Saylor over alleged tax fraud.

MicroStrategy, which holds the largest Bitcoin treasury among public companies, has helped Saylor "evade taxes he legally owes on hundreds of millions of dollars he’s earned while living in DC," Racine tweeted today.

Racine described Saylor as “a billionaire tech executive who has lived in the District for more than a decade, but has never paid any DC income taxes.”

According to a press release from Racine’s office, Saylor is accused of using an “elaborate scheme” to avoid paying income taxes in DC between the years 2014 and 2020. Saylor allegedly claimed that he was a Florida resident—a state without income taxes—but was actually present in DC most of the year, and openly bragged about the scheme.

Following a whistleblower lawsuit, Racine’s office investigated allegations and found that Saylor avoided paying more than $25 million worth of DC income taxes. Racine believes that MicroStrategy conspired to enable the scheme, including filing false W-2 statements with his Florida residence listed.

Between unpaid taxes and penalties, Racine estimates that Saylor and MicroStrategy could be on the hook for more than $100 million.

"A decade ago, I bought an historic house in Miami Beach and moved my home there from Virginia," Saylor told Decrypt in a statement responding to the lawsuit. "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."

"I respectfully disagree with the position of the District of Columbia, and look forward to a fair resolution in the courts," he added.

For its part, Microstrategy also disputed Racine's inclusion of the company in his action.

"The case is a personal tax matter involving Mr. Saylor," Microstrategy said in a statement to Decrypt. "The company was not responsible for his day-to-day affairs and did not oversee his individual tax responsibilities, nor did the company conspire with Mr. Saylor in the discharge of his personal tax responsibilities."

The company said the D.C. attorney general's accusations "are false, and we will defend aggressively against this overreach."

This is the first suit that the Attorney General is bringing under DC’s recently updated False Claims Law, he added, which “[encourages] whistleblowers to report residents who evade our tax laws by misrepresenting their residence.”

“With this lawsuit, we’re putting residents and employers on notice that if you enjoy all the benefits of living in our great city while refusing to pay your fair share in taxes, we will hold you accountable,” Racine added in a tweet thread.

Earlier this month, Saylor stepped down from his long-held role as MicroStrategy CEO to take on the new role of executive chairman, which he said would enable him to “double down” on the firm’s strategy of acquiring and holding large amounts of Bitcoin.

As of June 29, MicroStrategy held 129,699 BTC, which is worth nearly $2.6 billion today. According to the company, the coins were acquired at an average price of $30,664 apiece, so the firm’s investment is currently underwater.

Saylor and MicroStrategy previously settled charges of fraud from the United States Securities and Exchange Commission (SEC) back in 2000, after the company was alleged to have doctored its numbers and falsely reported profits despite losing money.

Editor's note: This article has been updated to include responses from Saylor and Microstrategy, and previously to include details of the DC attorney general's lawsuit and its allegations.

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