Washington, DC Sues Tech Billionaire For Allegedly Evading $25M in Taxes by Pretending to Live in Florida

On Wednesday, the District of Columbia’s Attorney General Karl A. Racine announced that his office is suing MicroStrategy executive chairman and Bitcoin-boosting billionaire Michael Saylor for alleged tax fraud. The District is also suing MicroStrategy for allegedly helping Saylor evade taxes on money earned while residing in DC.

Saylor co-founded the Virginia-based software company in 1989, but in recent years has turned his attention to Bitcoin. Saylor is one of the cryptocurrency's biggest boosters and has turned MicroStrategy essentially into a vehicle for investing in the price of Bitcoin. He claims to personally own nearly 18,000 bitcoins while MicroStrategy is sitting on another 129,699, according to an August SEC filing. 

The DC AG alleges that Saylor hasn't paid "any" income taxes to the District since he started living there in 2005, avoiding at least $25 million in taxes. 

The lawsuit is happening because of a recently-passed law called the False Claims Act, which empowers whistleblowers to come forward about alleged fraud against the government, and a whistleblowing realtor that came forward to claim Saylor failed to pay income taxes. Under the law, whistleblowers can be awarded up to 30 percent of the funds collected by the District. 

"Arguably the wealthiest person in the District—Forbes estimates his net worth at $2.3 billion— he has never paid a dime in District income tax," the whistleblower's complaint, filed by realtor Tributum in April but unsealed on Wednesday, states. 

After independently investigating the claims in the whistleblower's lawsuit—for example, that Saylor has in fact long been a resident of DC—the AG's office filed its own suit against Saylor and MicroStrategy, alleging that the company helped him evade taxes. 

“The suit alleges that Saylor engaged in an elaborate scheme to create the illusion that he lived in Florida, a state without personal income tax, while he actually resided in the District,” AG Racine said in a press release. The complaint alleges that Saylor not only bragged to his friends about this scheme, but that there is a sufficient digital trail to prove he spent most of his time living in a DC residence or in one of his many luxury yachts in DC.

“Defendant Saylor’s contemporaneous social media posts confirm that he lived in the District and considered it home both before and during the renovations to 3030 K Street NW,” a residence Saylor calls "Trigate," the District’s complaint reads. 

It offers multiple examples of posts where he clearly talks about the DC penthouse being his home: In one 2012 Facebook post he muses about setting up a tent in his Georgetown penthouse while he waits for renovations to finish and let him move back in. In another post he writes how he is "gazing wistfully at my future home while I wait for James to crack the whip on the contractors and herd the cats" with a picture of the view. Another post says: "Off to work. It is a perfect October morning on the Potomac, making it hard to leave home,” with a picture of a yacht.

“Beyond Saylor’s regular and open discussion of the fact that he lived in the District of Columbia, MicroStrategy was aware that Saylor lived in the District more than half of the year because it had access to multiple streams of real-time information about Saylor’s whereabouts,” the District’s suit claims. Not only did MicroStrategy payid for Saylor’s private driver, who which ferried him between his DC home and MicroStrategy’s office, the suit alleges, but it kept records on his location, travel, expenses, and paid for a security detail at his Trigate penthouse.

The District's suit also claims that in 2014 MicroStrategy's then-CFO was concerned about Saylor's alleged residency scheme, finding that "because Saylor spent the majority of each year in the District, MicroStrategy could not justify misreporting Saylor's residency to federal tax officials." When the CFO raised these concerns to Saylor as a possible liability for MicroStrategy, Saylor and the executive agreed to reduce his pay to $1, the suit alleges.

The AG's complaint alleges that Saylor took steps to hide the alleged fraud including registering to vote in Miami-Dade County in December 2012 and obtaining a Florida driver's license and registering vehicles with Florida license plates despite "almost exclusively using a professional driver." Saylor never physically voted in Florida, however, instead casting absentee ballots that were sent to MicroStrategy's corporate office in DC's suburbs as well as either his corporate headquarters in Virginia or home address in DC. 

As Jacob Silverman wrote for The New Republic, Saylor has a past checkered by accusations of fraud. He was accused of fraud in 2000 along with other MicroStrategy executives and helped pay $10 million to settle, without admitting to wrongdoing.

In one interview on the virtues of Bitcoin, Saylor explained how access to the tokens can be held by a single individual who holds the passphrase. “At the end of the day, if you push me too far, I lost it, it’s gone, sorry. Tax that.”

MicroStrategy did not respond to Motherboard’s request for comment.

“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,” said AG Racine in a press statement.