04/06/24

US: World's Largest Bitcoin Holder Settles Massive Tax Fraud Case

As published on: financefeeds.com, Tuesday 4 June, 2024. 

A Columbia court has reached a $40 million settlement with Michael Saylor and the software company he founded, MicroStrategy in the largest income tax fraud recovery in Washington’s history.

Microstrategy CEO Michael Saylor
The settlement arises from lawsuits filed in 2021 and 2022, accusing Saylor of evading over $25 million in income taxes in Washington, D.C.

The lawsuits allege that Saylor filed fraudulent tax forms from 2005 through 2020, falsely claiming residency in Virginia or Florida—states with significantly lower income tax rates—while avoiding paying income taxes to D.C. during that period.

MicroStrategy and Saylor have denied any wrongdoing but agreed to the $40 million settlement. Saylor, who stepped down as MicroStrategy’s CEO in 2022 and currently serves as executive chairman, has agreed to pay the full settlement amount as part of a separate agreement with the company.

“Michael Saylor and his company, MicroStrategy, defrauded the district and all of its residents for years,” said Brian L. Schwalb, the attorney general, in a statement. “Indeed, Saylor openly bragged about his tax-evasion scheme, encouraging his friends to follow his example and contending that anyone who paid taxes to the district was stupid.”

Saylor disputed the allegations, stating, “As I stated at the time this case began, in 2012 I moved to Florida and made Miami Beach my home. Florida remains my home today, and 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.”

The lawsuit details that in 2012, Saylor “embarked on a scheme to fraudulently misrepresent himself to be a resident of Florida,” purchasing a house in Miami Beach, obtaining a Florida driver’s license, and registering to vote there. Despite these claims, Saylor had ties to D.C., including owning three luxury condominiums in Georgetown and allegedly spending considerable time on his yacht on the Potomac River and at another penthouse in Adams Morgan.

Since Saylor’s initial investment in Bitcoin in 2020, the cryptocurrency’s value has soared by 675%, contributing to a steep jump in MicroStrategy’s stock price. The company’s market capitalization now stands at around $25.7 billion, surpassing its previous peak in March 2000.

Saylor’s personal Bitcoin holdings are also substantial. He revealed in a 2020 tweet that he had acquired 17,732 BTC at an average purchase price of $9,882. At current prices, his holdings are worth over $1.2 billion, placing him among the top Bitcoin addresses.

MicroStrategy was aware of Saylor’s presence in D.C., providing him with a security detail and drivers. In response to the investigations, MicroStrategy produced spreadsheets documenting Saylor’s daily physical location from 2015 to 2020, which showed that Saylor “spent a majority or plurality of each year physically present in the district.”

Saylor founded MicroStrategy in 1989 and helped the firm become one of the largest corporate buyers of Bitcoin.

This is not the first time Saylor and MicroStrategy have faced fraud allegations. In 2000, Saylor and two other executives settled accounting fraud charges with the Securities and Exchange Commission for about $11 million.

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