Billionaire bitcoin investor Michael Saylor and his company, MicroStrategy, have agreed to pay $40 million to settle a lawsuit brought by the Washington, D.C., attorney general. The lawsuit alleged that Saylor evaded over $25 million in District of Columbia income taxes by falsely claiming residency in lower-tax states like Florida and Virginia.
Key Takeaways
- Michael Saylor and MicroStrategy have agreed to a $40 million settlement.
- The lawsuit alleged Saylor evaded over $25 million in D.C. income taxes.
- Saylor and MicroStrategy deny any wrongdoing but settled to avoid prolonged litigation.
- The settlement marks the largest income tax recovery in D.C. history.
Background of the Case
The lawsuit, filed by former D.C. Attorney General Karl Racine in August 2022, accused Saylor of avoiding income taxes in the District for more than a decade. Saylor allegedly misrepresented his residency, claiming to live in lower-tax states such as Florida and Virginia. The attorney general’s office also accused MicroStrategy of conspiring to facilitate Saylor’s tax evasion.
Details of the Settlement
Under the agreement, Saylor and MicroStrategy deny violating District law and admit no wrongdoing. However, they have agreed to pay $40 million to settle the case. This settlement is the largest income tax recovery in the history of Washington, D.C.
Attorney General Brian L. Schwalb emphasized that the resolution should serve as a warning to other District residents attempting to dodge tax bills by pretending to live elsewhere. “No one in the District of Columbia, no matter how wealthy or powerful they may be, is above the law,” Schwalb stated.
Saylor’s Response
In a statement, Saylor said he moved to Florida in 2012 and made Miami Beach his home. “I continue to dispute the allegation that I was ever a resident of the District of Columbia. I have agreed to settle this matter to avoid the continued burdens of the litigation on friends, family, and myself,” Saylor said.
MicroStrategy clarified that this was a personal tax matter involving Saylor and that the company “was not responsible for his day-to-day affairs and did not oversee his individual tax responsibilities.” Under a separate agreement, Saylor will pay the District the full amount.
Legal Arguments and Evidence
In legal filings, the attorney general’s office argued that Saylor lived in a 7,000-square-foot penthouse on the Georgetown waterfront or on yachts anchored in the Potomac River. From 2005 through 2021, he allegedly paid no income tax to the city. Excel logs of Saylor’s location kept by his company showed that he met the threshold for needing to pay income taxes to the city, being present for 313 days in 2015 alone.
Saylor’s lawyers, led by Eugene Scalia, argued that the city’s case was a “speculative tale of connivance” filled with legal flaws. They contended that the District’s tax claims should have been dismissed for procedural and legal reasons.
Future Implications
The settlement bars any future action against Saylor or MicroStrategy on this matter. Saylor, who resigned as CEO of MicroStrategy in August 2022 but remains executive chairman, has agreed to comply with the District’s tax laws in the future. He will file a return and pay income taxes in the city for any year in which he owns or rents a residence and is physically present for at least 183 days.
Despite the legal challenges, Saylor continues to promote MicroStrategy as a Bitcoin-friendly company, regularly announcing new Bitcoin purchases on social media. As of March 2024, MicroStrategy holds 214,400 bitcoins, purchased at an average price of $35,000 per BTC, with a total investment of around $7.5 billion.
Sources
- Bitcoin billionaire Michael Saylor, firm settle D.C. tax fraud suit – The Washington Post, Washington Post.
- Billionaire Bitcoin Advocate Michael Saylor Agrees to $40 Million Settlement in Tax Evasion Case – Featured Bitcoin News, Bitcoin.com News.
- Michael Saylor settles $40M tax fraud lawsuit while promoting Bitcoin, Coinpedia.
