The District of Columbia will collect $40 million from the founder of a technology and bitcoin holding company to settle a whistleblower complaint that alleged tax fraud, the district's attorney general said Monday.

Largest Income Tax Recovery in District History

District Attorney General Brian L. Schwalb announced a settlement with MicroStrategy Inc. and its founder and former CEO, Michael J. Saylor. The $40 million settlement addresses a whistleblower complaint brought in 2021 under the district's False Claims Act. The suit alleged that Saylor falsely claimed residence in other jurisdictions to evade over $25 million in district taxes on his substantial income.

"Saylor openly bragged about his tax-evasion scheme, encouraging his friends to follow his example, and contending that anyone who paid taxes to the district was stupid," Schwalb said.

MicroStrategy Founder $40M Tax Fraud Suit : Denial of Allegations

Despite the settlement, Saylor and MicroStrategy deny any wrongdoing. According to the consent order, they maintain that they did not violate any district laws. Saylor, who claims he moved to Miami Beach, Florida, in 2012, continues to dispute the allegations of his residency in the District of Columbia.

"Florida remains my home today, and I continue to dispute the allegation that I was ever a resident of the District of Columbia," Saylor said through counsel. He agreed to the settlement to avoid the continued burdens of litigation for himself, his family, and friends.

MicroStrategy Founder $40M Tax Fraud Suit : MicroStrategy's Involvement

The district claimed MicroStrategy was complicit in the scheme by reporting false address information on Saylor's tax forms. However, MicroStrategy denied any responsibility, stating it did not manage Saylor's day-to-day affairs or oversee his individual tax responsibilities. According to a U.S. Securities and Exchange Commission filing, Saylor will pay the settlement amount in full, and the company will not contribute financially.

Origins of the Complaint

The initial whistleblower, Wyoming-based Tributum LLC, alleged unpaid taxes owed by Saylor from 2014 to 2020. The district's amended complaint in 2023 extended these allegations to include tax years from 2005 to 2013. The complaint detailed Saylor's lavish lifestyle in the district, including a 7,000-square-foot residence and multiple yachts docked in the district. Social media posts at the time corroborate his residency in the district, contradicting his claims of living in Virginia or Florida.

MicroStrategy Founder $40M Tax Fraud Suit : Legal Representation

The district's legal team includes Charles Sinks, Norman Anderson, Jason Jones, Sarah M. Levine, and Jessica M. Micciolo from the Office of the Attorney General for the District of Columbia. Saylor and MicroStrategy are represented by Eugene Scalia and Jonathan M. Phillips of Gibson Dunn & Crutcher LLP.

Impact and Implications

This settlement, hailed by Schwalb as the largest income tax recovery in district history, underscores the importance of the False Claims Act in combating tax fraud. Those who falsely claim residency elsewhere to evade district taxes can be held liable for three times the amount originally owed.

MicroStrategy, known as the largest publicly traded business intelligence company and the largest corporate holder of bitcoin, continues to navigate the legal and financial implications of this significant settlement.