DC Attorney General Karl Racine accused MicroStrategy co-founder and executive chairman 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 conspired to help Saylor evade taxes. The AG’s office said it is seeking to recover a total of more than $100 million in unpaid taxes and penalties.
Shares of MicroStrategy fell more than 6% Wednesday afternoon on the news. Saylor, who oversaw the company̵[ads1]7;s push into bitcoin, stepped down as CEO earlier this month. Under his leadership, MicroStrategy spent close to $4 billion acquiring bitcoin at an average price of $30,700, and he has said he considers the company’s stock a kind of bitcoin ETF.
Saylor allegedly claimed to be a resident of Virginia or Florida, which have lower or no personal income tax rates, when in fact he lives in several different homes around DC, including a penthouse in the Georgetown area of DC or on his yacht on the Georgetown waterfront or the Potomac River when the apartment was being renovated, according to the lawsuit. The lawsuit includes several screenshots of posts that appear to be from Saylor’s Facebook page dating back several years that refer to the view from his “Georgetown balcony” and discuss his “home” while tagging Washington, D.C.
Michael Saylor, chairman and CEO of MicroStrategy, first got into bitcoin in 2020, when he decided to start adding the cryptocurrency to MicroStrategy’s balance sheet as part of an unorthodox financial management strategy.
Eva Marie Uzcategui | Bloomberg | Getty Images
MicroStrategy reportedly “had detailed information confirming that Saylor was indeed a DC resident,” according to a press release, but chose to withhold that information.
Around 2014, the AG’s office claims in the lawsuit, MicroStrategy’s then-CFO confronted Saylor that his alleged tax evasion was a potential liability for the company. Saylor and MicroStrategy ended up reaching an agreement in which Saylor’s salary would be reduced to a nominal one dollar, the lawsuit claims, to reduce the risk that authorities would discover the alleged scheme. Still, the AG alleges, Saylor continued to take advantage of “fringe benefits” with a “high cash value,” such as use of the company’s aircraft.
The case is the first brought under a recently passed law called the False Claims Act, according to Racine’s office. The district law encourages whistleblowers to report tax fraud and allows the court to impose penalties up to three times the amount of the evaded taxes, according to the AG’s office.
The district lawsuit follows a separate complaint filed by whistleblowers against Saylor in April 2021, accusing him of failing to pay income taxes from 2014 to 2020. The complaint was filed under seal but was made public Wednesday.
The AG’s office said it independently investigated the whistleblower case and found that MicroStrategy had filed inaccurate W-2s with his Florida-based address and failed to withhold taxes allegedly owed to the district. The new lawsuit alleges that Saylor failed to pay income taxes he owed to the district beginning in 2005.
MicroStrategy did not immediately respond to CNBC’s request for comment.
MacKenzie Sigalos contributed to this story.
WATCH: Watch CNBC’s full interview with MicroStrategy CEO Michael Saylor on Bitcoin 2022