DC Attorney General Karl Racine accused MicroStrategy co-founder and CEO Michael Saylor of evading $25 million in county taxes in a new lawsuit filed Wednesday.
The lawsuit also names MicroStrategy as a defendant. Racine claims the company was conspiring to help Saylor evade taxes. The AG’s office said it is trying to recover a total of over $100 million in unpaid taxes and penalties.
MicroStrategy shares fell more than 6% on the news Wednesday afternoon. Saylor, who oversaw the company’s foray into Bitcoin, resigned as CEO earlier this month. Under his leadership, MicroStrategy spent almost $4 billion acquiring bitcoin at an average price of $30,700, and he said he views the company’s stock as a bitcoin ETF of sorts.
Saylor allegedly claimed to live in Virginia or Florida, which have lower or no personal income tax rates, when in fact he lived in several different homes around DC, including a penthouse in DC’s Georgetown neighborhood or on his yacht on the coast from Georgetown or on the Potomac River if, according to the lawsuit, the condo was renovated. The lawsuit includes multiple screenshots of posts appearing to be from Saylor’s Facebook page, dating back several years, relating to the view from his “Georgetown balcony” and talking about his “home” while tagging Washington, DC
MicroStrategy Chairman and Chief Executive Officer Michael Saylor first came into contact with Bitcoin in 2020 when he decided to add the cryptocurrency to MicroStrategy’s balance sheet as part of an unorthodox treasury management strategy.
Eva Marie Uzcategui | Bloomberg | Getty Images
According to a press release, MicroStrategy reportedly had “detailed information confirming that Saylor actually lived in DC,” but chose to withhold that information.
Around 2014, the AG’s office alleges in the lawsuit, MicroStrategy’s then-CFO confronted Saylor about his alleged tax evasion as a potential liability for the company. Saylor and MicroStrategy eventually reached an agreement that reduced Saylor’s salary to a nominal dollar, according to the lawsuit, to reduce the risk that authorities would uncover the alleged scheme. Still, the AG claims Saylor continued to benefit from “fringe benefits” with a “high cash value,” such as use of the company’s plane.
According to Racine’s office, the lawsuit is the first to be brought under a recently passed law called the False Claims Act. The county law gives whistleblowers an incentive to report tax fraud and allows the court to impose penalties of up to three times the amount of tax evaded, according to the AG’s office.
The district lawsuit follows a separate whistleblower complaint against Saylor in April 2021, alleging that he failed to pay income taxes from 2014 to 2020. The complaint was filed under wraps but was released on Wednesday.
The AG’s office said it independently investigated the whistleblower case and found that MicroStrategy submitted inaccurate W-2 forms with its Florida resident address and failed to withhold taxes allegedly owed to the district. The new lawsuit alleges that Saylor failed to pay the income tax he owed the district since 2005.
MicroStrategy did not immediately respond to CNBC’s request for comment.
MacKenzie Sigalos contributed to this story.
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