Michael Saylor, Tax Fraud and Bitcoin – Bitcoin Magazine
This is an opinion editorial by Dr. Riste Simnjanovski, a tenured professor of public administration at California Baptist University, and Kenneth Minesinger, a business and tax attorney.
If you’re in the Bitcoin space, you know about Michael Saylor. Regardless of your personal opinion of the individual, the companies he founded, ran or sold, or his perspective on monetary policy, many themes revolving around Saylor have become commonplace in academic, personal and political discussions.
In August 2022, via District of Columbia Attorney General Karl Racine and “Tributum, LLC” (note the irony that “Tributum” (the co-plaintiff) translates to “a tax imposed on citizens to finance the costs of war under ancient Rome” has not gone unnoticed; nor the fact that DC is actually a municipal corporation) has jointly filed a lawsuit against Saylor and MicroStrategy ( MSTR ), alleging, among other things, that “Defendant Michael J. Saylor has illegally deprived the District of Columbia of tens of millions of dollars in tax revenue .”
Much of this complaint/lawsuit revolves around the False Claims Act (FCA), which readers can learn about via the federal statute here , and the District of Columbia statute here , if they are inclined.
What is the False Claims Act?
The District of Columbia’s False Claims Act is modeled after the federal statute. In a nutshell, the federal statute originally enacted in 1863 was a response to defense contractor fraud during the American Civil War – the law was recently updated and now allows third parties (private companies, i.e. Tribulum, LLC) to file lawsuits in which they believes individuals, organizations, etc. have defrauded the US government… and then shares in any judgment (settled in US dollars) while suing individuals with the support and legal backing of the US government.
Historically, lawsuits under state and federal false claims statutes have been used to recover overpayments to contractors or payments where work was not performed. Notable cases include a $1 billion settlement against Bank of America and Countrywide Financial for submitting false claims by making loans insured by the Federal Housing Administration to borrowers they knew were ineligible in 2009, Bank of America (again) in 2014 for a record $16.65 billion settlement and a $22 million settlement in 2021 against the University of Miami for allegedly billing Medicare for unnecessary tests.
Recently, several states and the District of Columbia have amended their False Claims Act to allow refunds of underpayment of taxes.
This change has essentially made civilians and almost any attorney practicing law in the United States a tax auditor in the IRS; think red-flag laws, but with cash incentives to report your neighbors or colleagues. Please note that violators are liable for damages plus a penalty (which is linked to inflation).
At the heart of the complaint is where Saylor lived for 183 days per year (ie, more than 50% of the time in a calendar year) in recent years. If Saylor “resided” in DC for more than 183 days per year, during a calendar year, he is technically a “resident” of the jurisdiction and as such will be required to file taxes in that jurisdiction.
The submitted document can be viewed in its entirety here.
The complaint hinges on a whistleblower alleging that Saylor “fraudulently” claimed to be a resident of a lower-tax jurisdiction (a home in Florida). Also, MicroStrategy was added to those sued, alleging that “… the company conspired with defendant Saylor to facilitate his tax avoidance scheme.”
Politicization
Some may take offense at the politicization of how the case was announced, in particular, a tweet by Racine about it“NEW: Today we’re suing Michael Saylor — a billionaire tech executive who’s lived in the District for more than a decade but never paid any DC income taxes — for tax fraud.”
Even those with little or no legal expertise can see the challenge with how the tweet was composed, especially with the statement and implication of “fact” versus “allegation.” For example, a more appropriate and less politically charged announcement might have read something like: “NEW: Today we are suing Michael Saylor – a technical manager who we claim has lived with the district for more than a decade, and if our lawsuit is successful , will be required to pay back tax.”
The differences are subtle, but again, many may perceive the claim against Saylor and MicroStrategy as political versus factual; the courts will attempt to determine whether fraud has occurred.
Similarly, in 2021, Racine filed an antitrust case against Amazon, which a US court dismissed.
Then the paradox of the District of Columbia, specifically the Attorney General, using (collaborating) with Tributum, LLC, (listed as “The Relator” in section nine of the “Parties” disclosure), where the legal complaint alleges that Tributum, LLC, is a “Wyoming Limited Liability Company”; one only needs to do a simple Google search to bring up the company’s address in Virginia, specifically “32 N Augusta St Suite 6, Staunton, VA 24401.”
Alexandra Scaggs of the Financial Times identified this interesting aspect of the events, noting that Tributum LLC’s physical address is the same as the “Wyoming Registered Agent” (a company that essentially creates shell companies) and which promises “complete anonymity” to its customers.
Again, it is not the intention of the authors to suggest that any criminal or unethical conduct has occurred with reference to Tributum, LLC, or to imply the fact that the whistleblower who submitted the report to this company is in any way wrong, inaccurate or unfounded. Rather, it’s meant to point out that the basis and origins of the lawsuit leave unanswered questions without much investigation — an investigation that could play out in court should these events result in a lawsuit.
Jump to conclusions
Personally, we really have no idea if Saylor or MicroStrategy has conspired to avoid taxes in the DC area over the past decade, and truthfully, neither has anyone else on the planet, including Racine; that’s what the US courts are for – not the Twitter court.
The fact that the attorney general took a screenshot of a tweet from Saylor from 2012 (see page six of the lawsuit) seems more likely to gaslight the tech boss and MicroStrategy as opposed to making a true legal argument. However, this is simply perception (optics) and not necessarily reality.
Again, that’s what the courts are for, one lawyer who makes public statements that someone has “lived in the district for more than a decade but never paid any DC income tax – for tax fraud” jumps to conclusions that Twitter trolls are called out for jumping on a daily basis, let alone an elected official with a law degree.
Let’s draw some conclusions on this point, since everyone else has, and we don’t want to miss out on the fun of baseless claims posted on Twitter.
An attorney general who has recently filed antitrust lawsuits against Amazon (again, dismissed by a US court) and against Michael Saylor (one of the most vocal Bitcoin advocates on earth) personally, and MicroStrategy (one of the most pro-Bitcoin public companies ) on Earth) professionally, may have more to do with an attempt to appease or tarnish Bitcoin supporters versus an attempt to collect potential back taxes, plus penalties and interest. Again, time will tell – maybe the Attorney General has a true legal argument and this case will settle out of court or go to trial.
Who knows for sure? But what we can say is that the verdicts should come out in court and not on Twitter. As researchers, we have hunches and opinions, but slander is a slippery slope in public forums, as are allegations of wrongdoing.
We encourage the Bitcoin community to pay close attention to how this case unfolds before judging any person or organization, including but not limited to: Michael Saylor, MicroStrategy, Racine, District of Columbia, and/or Tribulum, LLC.
This is a guest post by Riste Simnjanovski and Kenneth Minesinger. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
