Michael Saylor Tax Fraud And Bitcoin

This is a re-write of an editorial opinion by Dr. Riste Simnjanovski, a tenured professor of public administration with California Baptist University, and Kenneth Minesinger, a business and tax lawyer.  

This is our disclosure:  This summary is for informational purposes only. This summary is not intended to be a recommendation for or give advice for any company or individual.

If you’re in the Bitcoin space, you know of Michael Saylor. Regardless of your personal opinion of the individual, the companies he’s founded, run or sold, or his perspective on monetary policy, many topics revolving around Saylor have become commonplace in academic, personal and political discussions.

In August 2022, via Attorney General Karl Racine, the District of Columbia and “Tributum, LLC” (please note that the irony of “Tributum” (the co-plaintiff) translating to  “a tax imposed on citizens to fund the cost of war during Ancient Rome” hasn’t gone unnoticed; nor has the fact that DC is actually a municipal corporation) jointly filed a lawsuit against Saylor and MicroStrategy (MSTR), claiming, among other items, that, “Defendant Michael J. Saylor has unlawfully 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’s statute here, if they are so inclined.

What Is The False Claim Act?

The District of Columbia’s False Claim Act is modeled after the federal statute. In a nutshell, the federal statute originally enacted in 1863, was in response to defense contractor fraud during the American Civil War — the law was recently updated and now allows third parties (private companies, ie, Tribulum, LLC) to bring forth lawsuits in which they believe individuals, organizations, etc. have defrauded the US government… and then share in any judgment (settled in US dollars) as they sue individuals with the support and legal backing of the US government.

Historically, lawsuits under state and federal false claims statutes have been utilized to recover overpayment to contractors or payment where work wasn’t performed. Notable cases include a $1 billion settlement obtained against Bank of America and Countrywide Financial for submitting false claims by making loans insured by the Federal Housing Administration to borrowers they knew to be unqualified in 2009, Bank of America (again) in 2014 for a record- breaking $16.65 billion and a $22 million settlement in 2021 against the University of Miami for allegedly billing Medicare for unnecessary tests.

More recently, several states and the District of Columbia have amended their False Claim Act to allow for the recovery of underpayment of taxes.

This change has essentially deputized civilians and nearly any attorney practicing law in the US into an IRS tax auditor; 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).

The crux of the complaint filed revolves around where Saylor resided for 183 days per year (ie, more than 50% of the time in a calendar year) for the past few years. If Saylor “resided” in DC for more than 183 days per year, in a calendar year, then he is technically a “resident” of the jurisdiction and as such, would be required to file taxes in that jurisdiction.

The complaint hinges upon a whistleblower suggesting that Saylor “fraudulently” claimed to be a resident of a lower-tax jurisdiction (a home in Florida). Moreover, MicroStrategy was added to those being sued, with a claim that, “… the company conspired with Defendant Saylor to facilitate his tax avoidance scheme from him.”

Politics

Some may take offense to the politicization of how the suit was announced, specifically, a Tweet by Racine stating“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.”

Even those with little to no legal expertise can see the challenge with how the Tweet was composed, specifically with the statement and implication of “fact” versus “claim.” For example, a more appropriate and less politically-charged announcement might have read something along the lines of, “NEW: Today, we’re suing Michael Saylor – a tech executive whom we claim has lived in the District for more than a decade, and if our lawsuit is successful, it would be required to pay back taxes.”

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 if fraud occurred.

In a similar vein, in 2021, Racine filed an antitrust suit against Amazon, which a US court dismissed.

Next, the paradox of the District of Columbia, specifically the attorney general, utilizing (collaborating) with Tributum, LLC, (listed as “The Relator” in section nine of the “Parties” disclosure), where the legal complaint claims that Tributum, LLC, is a “Wyoming Limited Liability Company;” one only needs to do a simple Google search to have the firm’s address come up 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 sets up shell corporations) and which promises “complete anonymity” to its clients .

Again, it is not the intention of the authors to suggest that any criminal or unethical conduct has occurred in reference to Tributum, LLC, or to suggest the fact that the whistleblower who filed the report to this company is in any way incorrect, inaccurate or unfounded. Rather, it’s the intention to point out that the underpinnings and origin of the lawsuit leave unanswered questions without much investigation — an investigation that may come out in court should these events result in a trial.

Jumping To Conclusions

Personally, we genuinely have no idea if Saylor or MicroStrategy conspired in order to avoid taxes in the DC area over the past decade, and in truth, neither does anyone else on the planet, including Racine; that is what the US courts are for — not the court of Twitter.

The fact that the attorney general screenshot a Tweet from Saylor from 2012, (see page six of the court filing), appears to be more inclined to gaslight the tech executive and MicroStrategy versus making a true legal argument. However, this is simply perception (optics) and not necessarily reality.

Again, that is what the courts are for, an attorney stating, publicly, that someone has “lived in the District for more than a decade but has never paid any DC income taxes – for tax fraud” jumps to conclusions that Twitter trolls get called out for jumping to daily, let alone an elected official with a law degree.

Let us jump to some conclusions at this point, since everyone else has and we don’t want to miss out on the fun of baseless claims posted to Twitter.

An attorney general who has recently filed lawsuits against Amazon for antitrust (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 silence or tarnish Bitcoin proponents versus an attempt to collect potentially tardy taxes, plus penalties and interest. Again, time will tell—perhaps 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 judgments should come out in court and not on Twitter. As researchers, we have hunches and opinions, however, slander is a slippery slope in public forums, as are claims of wrongdoing.

We encourage the Bitcoin community to pay particular attention to how this case plays out before casting judgments on any individual or organization, including, but not limited to: Michael Saylor, MicroStrategy, Racine, the District of Columbia and/or Tribulum, LLC.

This is a re-written post of a guest post by Riste Simnjanovski and Kenneth Minesinger. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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