The District of Columbia attorney general has reached a $40 million settlement with Michael Saylor and the software company he founded, MicroStrategy, according to information obtained by The New York Times, which the attorney general's office said is the largest income tax fraud recovery in Washington history.
The settlement, expected to be announced Monday, stems from lawsuits filed in Washington alleging that Saylor evaded more than $25 million in income taxes in 2021 and 2022. According to the attorney general's office, Saylor, with the assistance of MicroStrategy, filed false tax returns from 2005 to 2020 claiming that he lived in Virginia or Florida, where income tax rates are significantly lower, and that he paid no income taxes to the District during those periods.
MicroStrategy and Saylor have denied any wrongdoing. They agreed to a $40 million settlement, including interest and penalties, to avoid the cost and time of further litigation, according to settlement documents reviewed by The Times. Saylor, who serves as MicroStrategy's board chairman, is due to step down as chief executive officer in 2022.
“For years, Michael Saylor and his company, MicroStrategy, defrauded the District and all of its residents,” Attorney General Brian L. Schwalb said in a statement. “In fact, Saylor openly bragged about his tax evasion scheme, encouraged friends to follow his example, and claimed that anyone who paid taxes to the District was stupid.”
“As I stated when this litigation began, I moved to Florida in 2012 and made Miami Beach my home. Florida remains my home and I continue to dispute the assertion that I was a resident of the District of Columbia,” Saylor said in a statement. “I have agreed to settle this matter to avoid the continuing burden of litigation on my friends, family and myself.”
According to the complaint, in 2012, Saylor “embarked on a scheme to fraudulently represent himself as a Florida resident because the state has no personal income tax,” purchased a home in Miami Beach, obtained a Florida driver's license and registered to vote in the state.
Saylor founded MicroStrategy in 1989 and helped the company become one of the largest corporate buyers of bitcoin. That bet paid off: Bitcoin's price has soared, and MicroStrategy's shares have risen more than 100% this year, giving it a market capitalization of $27 billion.
This isn't the first time Saylor or MicroStrategy have been accused of fraud: In 2000, Saylor and two other MicroStrategy executives settled accounting fraud charges with the Securities and Exchange Commission for about $11 million.
The Washington state tax lawsuit, filed by former Attorney General Karl Racine, is the first to be filed since the federal anti-fraud statute, the False Claims Act, was amended in 2021 to give whistleblowers the authority to report tax evasion in Washington state. A whistleblower filed suit against Saylor that year, and Racine filed his own lawsuit in 2022 for the District.
The Biden administration has made cracking down on tax evasion by corporations and the wealthy a central part of its economic policy, including budgeting billions of dollars to overhaul the Internal Revenue Service.
The lawsuit details Saylor's life in the area, where he bought three luxury condominiums atop waterfront buildings in the Georgetown neighborhood between 2006 and 2008. While he spent millions of dollars renovating what he came to call “Tri-Gate,” the lawsuit says, Saylor also spent time on his yacht docked on the Potomac River and in his penthouse in Adams Morgan.
The lawsuit cited Saylor's social media posts to support its claims. In one post, apparently from the yacht he was staying on while renovating his home, Saylor tagged architect James Van Wynen and wrote, “Looking wistfully at my future home while waiting for James to whip out the contractors and get the cat together. I wonder if Tony Stark is that patient.”
In another post, he wrote: “The view from my balcony in Georgetown this morning. Now all that's left is to finish renovating my apartment so it's liveable again. I think I'll put up a tent outside on my terrace for now.”
According to the complaint, MicroStrategy knew where Saylor spent his time because it provided him with security and a driver. In response to the investigation, MicroStrategy created a spreadsheet that documented Saylor's daily physical locations from 2015 through 2020, which showed that Saylor “physically spent a majority or majority of each year in the area.”
