The MicroStrategy team ringing the opening bell on the Nasdaq Stock Exchange back in 2019.

(Photo via Michael Saylor on Twitter)

On Wednesday, DC Attorney General Karl Racine announced that he was suing ex-MicroStrategy CEO Michael Saylor and the Tysons, Virginia data and business intelligence software company he still chairs. The suit claims that Saylor falsely claimed residency in Miami, Flordia, and failed to pay the district millions of dollars in income taxes — all while owning five luxury yachts and a private jet, as well as making a huge name for himself in the cryptocurrency world. MicroStrategy and the attorney general’s office did not respond to a request for comment on the proceedings.

The suit is made possible by a recently updated law, the False Claims Act, that is aimed at those who fail to pay a large amount of taxes (and rewards those who report it by allowing them to collect a percentage of the funds owed). This is the first lawsuit brought under the newly amended act.

NEW: Today, we’re suing Michael Saylor – a billionaire tech executive who has lived in the District for more than a decade but has never paid any DC income taxes – for tax fraud.

— AG Karl A. Racine (@AGKarlRacine) August 31, 2022

The case against Saylor began with a whistleblower complaint filed in 2021, which was initially sealed and made public yesterday.

“Michael Saylor is a resident of Washington DC, and has been for a long time. 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 complaint reads. “For nearly a decade, Saylor has been engaged in a fraudulent scheme to deprive the District of tax revenue on hundreds of millions of dollars in income that he earned while a resident of the District by falsely claiming to be a resident of Florida.”

Saylor first trekked to DC via a summer engineering job while he was a student at the Massachusetts Institute of Technology in 1986. He returned to school in Massachusetts on an Air Force scholarship, which was supposed to hold him to a 10-year piloting agreement post-graduation. But after the Air Force revoked his pilot’s status in 1987, he instead went on to found MicroStrategy in 1989 in Wilmington, Delaware.

In the time afterward, cofounder Sanju Bansal (Saylor’s former roommate from his DC summer) convinced Saylor to take a second look at his company’s HQ. And in 1994, MicroStrategy and Saylor moved to Northern Virginia.

While Saylor remained in NoVa during the following decade, he spent a good amount of time in DC and was even named the city’s most eligible bachelor, according to a Newsweek article cited in the suit. This was also around when, following the company’s 1998 IPO, Saylor and MicroStrategy lost $6 billion in a single day in 2000. The company and its executives paid $11 million in fraud charges to the Securities and Exchange Commission later that year.

Saylor then officially made the jump into DC, with court documents saying he started residing in Georgetown in 2003. In 2006, he purchases a penthouse on K Street NW as well as the two adjoining apartments, eventually converting them into one unit known as “Trigate” (custom woodwork for which apparently cost over $5 million). Saylor resided in an apartment in Adams Morgan as well as his luxury yachts during renovations.

Then, in 2012, he purchased a home known as “Villa Vecchia” in Miami, Florida (where there is no personal income tax) and supposedly moved there full-time. He also obtained a Florida driver’s license, changed his voter registration and registered cars with Florida plates.

But — according to a paper trail of social media posts, flight data and personal accounts from friends and colleagues that the attorney general cited — he actually spent most of his time in DC. District law states that a person is a resident if they remain in the District for at least 183 days per year, including temporary vacations and other short trips.

“Saylor’s geolocation history establishes his connection to the District — where he maintained a place of abode either at Trigate or aboard one of his yachts — for substantial periods of time during each year from 2013 through 2020 to establish his tax liability to the District,” the whistleblower complaint says.

All in all, Racine’s suit noted that from 2005 until now, Saylor has neglected to pay $25 million in DC taxes. Per DC law, the district can recover up to three times what is owed from those who violate the False Claims Act, and whistleblowers can be awarded up to 30% of that.

The filing traces MicroStrategy’s role in the suit back to 2014. At the time, the former chief financial officer of MicroStrategy counted the number of days that Saylor was in DC and Florida. Finding that Saylor spent most of his time in the district, the official told Saylor that the company couldn’t misreport the latter’s residency to federal tax authorities. Saylor and the CFO then formed an agreement to reduce Saylor’s salary to $1.00, the filing says, to avoid liability on MicroStrategy’s part.

“Citing the difficulties facing the Company, Saylor announced that he was accepting a reduced annual salary of $1.00, claiming that his pay cut was an act of service and investment in the Company,” the whistleblower complaint reads. “In reality, Saylor’s compensation adjustment served a more cynical personal purpose — it allowed him to continue circumventing District income taxes without implicating the chief financial officer or other financial professionals at MicroStrategy in the scheme.”

Separate from this incident, it’s worth noting that amid the ups and downs, MicroStrategy has had a huge impact on DC tech. Its cofounders and alumni have gone on to create and build up a number of startups including Eloqa, Appian, Stride, Verato, Clarabridge and Alarm.com, to name a few.

Back in November 2020, MicroStrategy made crypto news headlines when it purchased 21,454 bitcoins for $250 million as a capital allocation strategy and continued purchasing more over the past few years. As of June, MicroStrategy said it owned 129,699 bitcoins — a $1.988 billion value but a $1.989 cumulative impairment loss.

But that’s not the end of the company’s Bitcoin story. Last month, Saylor actually left his post as CEO for a role as executive chair of the board, claiming that he was leaving to focus on the company’s crypto moves. Saylor had been CEO of the company since its founding in 1989.

Just exactly how far MicroStrategy’s involvement goes remains to be seen. But following the company’s crypto moves, Saylor noted the potential of using Bitcoin for tax evasion. Following President Joe Biden’s move to tax cryptocurrency, Saylor said in a video clip that crypto’s ability to move location to avoid being taxed meant that it was, essentially, an industry not to be messed with.

“I can’t just tax all the Bitcoin in California, it’ll move to Wyoming,” said Saylor in the video. “It’ll move to Singapore, it’ll move to Malta. And at the end of the day, you can tell everybody to go fuck themselves, you can put it in your head, memorize the fricking key and it’s [in your brain]. And the classic Bitcoiner response is: ‘Bitcoin? I lost it in a boating accident.’ You ever heard that phrase? It’s kind of a trope, but what it means is, at the end of the day, if you push me too far, I lost it, it’s gone, sorry. Tax that.”