D.C.’s bitcoin king: yachts, penthouses, a python — and tax dodging?
The whistleblowers’ allegations come in a lawsuit filed in D.C. Superior Court that provides a stunning inside look at the lavish lifestyle of what it calls “arguably the wealthiest person in the District” and an allegedly brazen scheme to defraud the city of tens of millions. It is one of the largest income tax cases in D.C. history.
The whistleblowers, whose legal efforts were joined by District officials in August, stand to earn a staggering payday — possibly $25 million or more — and to return as much as $150 million to city coffers if their case against the Saylor is successful.
Saylor, who denies any wrongdoing, is the first target of a little-noticed revamp of a District law, which now allows citizens to file complaints against alleged tax cheats on behalf of the city and collect a bounty if they win their case.
Such statutes are quickly becoming a powerful tool to hold tax scofflaws among the ultrawealthy and powerful corporations accountable in an era of rising concern about wealth disparity and tax dodges among the wealthiest 1 percent. A similar law in New York has recovered a whopping $467 million in back taxes, according to an analysis noted by D.C. officials. Other states are taking notice.
Saylor, who contends in court papers he has never been a D.C. resident, said in a statement he lives in Florida and it is “the center of my personal and family life.” He is seeking to have the case dismissed.
D.C. Attorney General Karl A. Racine said in an interview Saylor’s case has spurred an outpouring of tips under D.C.’s new False Claims Act. He said his office is already investigating “multiple” additional cases of alleged tax fraud and has received other whistleblower complaints.
Racine alleges Saylor has not paid a dime of income tax in the District, despite living there since 2005. He would have to prove Saylor was a resident in the city 183 days in each of those years, the threshold for owing D.C. income tax.
“This case, and the notoriety it has received, has put taxpayers on notice — individual and corporate. Clearly it has incentivized individuals who may have evidence of wrongdoing and tax cheating,” Racine said. “Our phone is ringing off the hook.”
A meteoric rise, a swifter fall
Saylor rocketed to fame during the tech boom of the late 1990s as CEO of the Virginia-based data analytics company, MicroStrategy. He became the D.C. area’s richest person, Newsweek compared him to Edison and he was feted as a major figure of the first internet era. He made People magazine’s list of most eligible bachelors.
But Saylor’s meteoric rise was followed by an even swifter fall.
Saylor and MicroStrategy were ensnared in a scandal in 2000 that forced it to restate its earnings, cratering the company’s value. Saylor personally lost $6 billion in a few hours, becoming the answer to a Trivial Pursuit question: Who has lost the most money in a single day?
“It’s the same story in a way of a classic Greek tragedy,” Don Griffith, a childhood friend of Saylor’s told The Washington Post in 2002. “It’s the story of Icarus and Daedalus. Mike was the guy who flew too close to the sun.”
Saylor held on as CEO of MicroStrategy and improbably returned the company to profitability in the following years. Forbes listed his fortune at $1.6 billion in April, but drops in MicroStrategy stock and declines on bitcoin he holds have halved it in recent months.
The whistleblowers’ complaint says Saylor undertook a massive four-year renovation project in 2010 to knock out the walls between three penthouses on the Georgetown waterfront to create a home he christened “Trigate.” Racine’s lawsuit claims the woodworking budget alone was more than $5 million.
While the project was ongoing, Saylor spent part of his time living in his other penthouse in Adams Morgan and on “Moksha” and “Firefly,” two of the five yachts he has owned, according to the whistleblowers’ complaint. They were docked in the Georgetown Harbor, and the complaint states Saylor began throwing “near-nightly” parties on the boats.
While Trigate was still under construction, Saylor posted a photo of it on Facebook in 2012 and compared himself to the magnate and playboy from the “Iron Man” comics, according to details in Racine’s lawsuit. He also referenced his architect James Van Wynen in the post.
“Gazing wistfully at my future home while I wait for James to crack the whip on the contractors and herd the cats,” Saylor wrote. “I wonder if Tony Stark would be so patient …”
That same year Saylor purchased a $13.1 million historic mansion in Miami Beach called “Villa Vecchia” and began claiming he was a Florida resident for tax purposes, according to the whistleblowers’ complaint. Racine contends the tax dodging began as soon as Saylor allegedly came to D.C. years earlier.
“Demonstrating his disdain for the rules that everyone else has to live by, Saylor publicly flaunted his billionaire lifestyle while bragging to his friends and associates about how he was evading District taxes,” the whistleblowers’ complaint alleges.
Saylor registered to vote and obtained a driver’s license in Florida, even though Trigate was finished in 2014 and continued to be his primary home, the whistleblowers contend.
Saylor claims in legal filings he lived in Virginia and Florida between 2005 and the present day and filed federal taxes from his Miami Beach home in later years.
“I respectfully disagree with the position of the District of Columbia, and look forward to a fair resolution in the courts,” Saylor said in a statement. He did not respond to numerous requests for an interview, and Saylor’s attorney declined to comment.
Saylor’s alleged scheme eventually drew in his company, the whistleblowers allege. As MicroStrategy’s revenue faltered in 2014, Saylor agreed to reduce his salary to $1, publicly saying the pay cut was an act of service and investment in the company.
But the whistleblowers claim it was actually a cynical ploy that allowed Saylor to circumvent D.C. taxes without implicating staff at MicroStrategy who, according to the complaint, knew he lived in the District and were uneasy with him claiming Florida residency for tax purposes. The whistleblowers’ complaint alleges Saylor continued to receive lavish perks and benefits from the company worth more than $1 million a year.
Racine alleges in his filing intervening in the whistleblowers’ suit that MicroStrategy actively conspired with Saylor to carry out tax fraud and named the company as a second defendant. MicroStrategy promised to fight the lawsuit.
“The case is a personal tax matter involving Mr. Saylor,” the company said in a statement. “The Company was not responsible for his day-to-day affairs and did not oversee his individual tax responsibilities. Nor did the Company conspire with Mr. Saylor in the discharge of his personal tax responsibilities.”
The defendants filed a joint motion to dismiss the case in late October, arguing the new D.C. law is illegal, Racine did not meet its legal requirements and Racine failed to show how MicroStrategy conspired with Saylor.
All told, Racine alleges Saylor failed to pay at least $25 million in income taxes, but he could owe much more. D.C. law allows the city to collect triple the owed amount in damages, along with assorted interest, fees and penalties. Racine said in the interview he hopes to recover more than $100 million from Saylor. The whistleblowers would keep 15 to 25 percent if and when any money is recovered.
Saylor has sometimes mused about how to avoid taxes in media appearances. He said in one interview that bitcoin holders could tell the taxman they lost their access key to the cryptocurrency and “go f— themself.”
“Tax that!” he exclaimed.
Saylor’s potential D.C. tax trouble began in Wyoming, of all places.
That is where the whistleblowers registered a shell company called Tributum, LLC to file its legal complaint. Corporate records in Wyoming and D.C. give no indication who is behind Tributum — and that is the point.
Douglas Gansler, an attorney representing the whistleblowers and a former Maryland Attorney General, said his clients are multiple people and wish to remain anonymous. Experts said setting up shell companies is becoming an increasingly common tactic to safeguard whistleblowers from retaliation.
“The point here is not to shed light on the whistleblowers,” Gansler said. “The point here is to hold the defendant accountable. Especially when you’re dealing with wealthy people, there’s the possibility of retribution.”
Gansler said his clients came forward because they were concerned about Saylor’s alleged tax fraud, but also interested in the bounty. He did said the LLC’s name was chosen pointedly — Tributum was a tax in ancient Rome.
Speculation about the whistleblowers’ identities has ranged widely from investors upset with the performance of MicroStrategy, to disgruntled MicroStrategy employees and acquaintances who were privy to Saylor’s living situation.
Saylor and MicroStrategy assert in a legal filing that MicroStrategy’s former chief legal officer, Jonathan Klein, is “closely tied” to Tributum. Klein abruptly left the company in 2016 amid staff cuts. He did not respond to requests for comment, and Gansler declined to comment on whether Klein is one of the whistleblowers.
Whoever the whistleblowers are, they appear to know a lot about Saylor.
The 24-page complaint draws on meticulous research. The whistleblowers tracked Saylor’s corporate jet, his appearances in the media and his Facebook posts in their effort to establish the time he spent in D.C. and Florida. It also cites internal MicroStrategy deliberations, private tax information and conversations among Saylor’s inner circle.
The complaint even includes a chart that purports to show exactly how many days Saylor spent in D.C. each year over a seven-year period.
“It would be interesting to know what sparked someone to pursue this, but clearly they put a lot of time into building it out,” said Michael Ronickher, a D.C. attorney who handles whistleblower complaints.
The District and most states have long allowed whistleblowers to sue people who have defrauded the government to recover funds on behalf of a city or state. The whistleblower usually shares a portion of the proceeds.
These False Claims Act laws are modeled on a Civil War-era federal statute that has helped return billions to federal coffers, but the federal law bars action on tax fraud, and most states have followed that lead in their statutes.
D.C. switched that up with its new False Claims act, which went into effect in 2021 and allows whistleblowers to pursue cases in which the alleged fraudster has income of more than $1 million and damages collected will exceed $350,000. At first it was little known outside wonky tax circles.
Under the law, complaints are filed in D.C. Superior Court and forwarded to the D.C. Attorney General’s office for review. The office researches the claims and can decide to take over the case if it has merit. If it does not, the whistleblower is free to pursue it on his or her own and keep a portion of any money won.
D.C.’s law is based on New York state’s 2009 revamp of its False Claims Act, which has returned hundreds of millions to its coffers and made a few whistleblowers wealthy — one reaped a $62.7 million windfall. Successes include a New York hedge fund manager who paid $105 million to settle claims he evaded taxes, Sprint shelling out $330 million for failing to collect taxes and a celebrity tailor to Rudy Giuliani who had to cough up $5.5 million for alleged tax evasion.
The allegations come during a difficult stretch for Saylor.
In recent years, Saylor has refashioned himself as a bitcoin champion and has become a major figure in the cryptocurrency world, regularly appearing on cable TV and at conferences. He has used MicroStrategy reserves and large loans to buy roughly $4 billion in bitcoin, making MicroStrategy the world’s largest publicly-traded corporate holder.
Experts said that is a huge gamble on a notoriously volatile and speculative digital asset.
The bet had paid off handsomely for MicroStrategy, until the recent crypto crash. By the end of August, those bitcoin assets had dropped in value to about $2.6 billion, meaning MicroStrategy had lost about $1.4 billion on paper. Saylor stepped down as CEO of MicroStrategy on Aug. 22, but continues as chairman of the board. Bitcoin and MicroStrategy stock plunged again last week following the collapse of the cryptocurrency exchange, FTX.
Bitcoin believers and Saylor feel his moves to amass crypto will eventually pay massive dividends, but some investors, like Ryan Ballentine of Bireme Capital, are shorting MicroStrategy stock. He sees Saylor headed for another crash, reminiscent of the early 200os MicroStrategy crunch — and Saylor’s tax issues do not help.
“He seems to be someone who is summoned by a large bubble every couple of decades,” Ballentine said. “History doesn’t repeat itself, but it rhymes, and you are seeing a similar dynamic today.”