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A tax fraud lawsuit against Saylor could be bad for Bitcoin prices, an analyst said.
Ozan Kose/AFP via Getty Images
High profile
Bitcoin
proposer Michael Saylor and
Micro strategy
— the company he co-founded and leads as executive chairman — is facing a tax fraud lawsuit in DC that could see the tech billionaire and the company on the hook for more than $100 million.
District of Columbia Attorney General Karl Racine on Wednesday announced a lawsuit against Saylor for allegedly illegally evading $25 million in taxes, also naming
Micro strategy
(ticker: MSTR) as defendants for allegedly conspiring to aid Saylor.
Micro strategy
did not immediately respond to a request for comment from Barron’s.
The Office of the DC Attorney General alleged that Saylor illegally avoided taxes in DC for years by pretending to be a resident of other jurisdictions, namely Florida, which has a zero personal income tax. The lawsuit further alleged that MicroStrategy was aware that Saylor was a DC resident and cooperated with him to facilitate tax evasion, including by filing inaccurate Internal Revenue Service forms.
Saylor, a billionaire, co-founded MicroStrategy in 1989 and led the business intelligence company as CEO until earlier this year. His management of the group has largely been characterized by a strategy of buying and holding Bitcoin, a move that has seen the stock trade largely in step with the largest cryptocurrency.
A whistleblower complaint that sparked the D.C. lawsuit alleged that Saylor had failed to pay income taxes he owed from 2014 to 2020 and engaged in “an elaborate scheme” to create the illusion he was living in Florida — when he was actually living in D.C. The complaint also alleged that Saylor was physically present in DC for most of the year, and openly bragged to friends and acquaintances about evading DC taxes, and encouraged others to do so as well.
The lawsuit against Saylor is the first in DC under a recently passed law that encourages whistleblowers to report tax evasion and, in turn, collect a percentage of the money recovered by the court. The law also paves the way for the court to impose “triple damages”, punishing tax evaders with three times the amount of tax evaded.
The attorney general’s office said it is seeking to recover unpaid income taxes and penalties from Saylor and MicroStrategy that could top $100 million.
MicroStrategy shares traded 2.5% lower in the US premarket on Thursday. And at least one analyst in the digital asset space is concerned that the legal pressure on Saylor — a so-called Bitcoin whale — could exacerbate recent crypto price falls.
“New fears are setting in around Michael Saylor, and his company MicroStrategy, being sued for tax fraud,” Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, wrote in a note. “Since MicroStrategy is one of the largest Bitcoin holders, crypto investors began to panic over whether Michael Saylor would have to liquidate some Bitcoin to pay for the fines that come with it.”
Write to Jack Denton at [email protected]
