MicroStrategy whistleblower offers surprising insight into Michael Saylor in $25 tax evasion lawsuit

The District of Columbia filed a civil suit on August 31, alleging that Michael Thaler, a major Bitcoin proponent, defrauded the district of $25 million in tax dollars. Prices of major cryptocurrencies have yet to be affected by the revelations of the incident. It paints an interesting image of the alleged behavior.

The lawsuit alleges Thaler called other wealthy people who paid taxes in the district “fools” and encouraged his friends to imitate him. He recruited people at MicroStrategy to join forces on a complex plan to get things done. Realizing Thaler flagrantly avoided millions of dollars in taxes and endangered the company he built, the management of the data analytics firm submitted to his boss out of fear.

A previous whistleblower’s allegations spawned the District’s case. Districts have historically used false billing laws to track down contractors who overcharge or fail to complete construction projects, for example. The District of Columbia changed the law in 2021 to allow private residents to sue “high-income organizations and individuals” for tax evasion, with DC as co-plaintiff. The first action was taken by a whistleblower in August 2021, with Taylor charged with fraudulently avoiding his $25 million payment. The lawsuit was sealed and remained private until the district filed another lawsuit containing essentially the same charges on his last day in August.

It’s clear that the whistleblower had extensive contact with Michael Saylor, and given their understanding of power struggles within MicroStrategy, they could have been senior executives. The accusers’ story is pretty detailed. From 2013 to 2020 Thaler claims to have spent most of his time in DC, despite claiming to live in Florida, a state with no income tax. It’s chock full of fun tidbits that underscore his love for: how Thaler put together three gorgeous Georgetown waterfront apartments to create a 7,000-square-foot penthouse he calls Trigate, and A backup plane docked in front of the yacht mansion, where he actually lived most of his time, frequenting the famous Café Milano and flying around the world in MicroStrategy’s Bombardier Global Express private jet. enthusiasm. Trips in and out of Sailor’s district for the last 20 years.

Thaler paid $13.1 million in 2012 for Villa Vecchia, a Mediterranean bayfront villa in Miami Beach, according to the complaint. He quickly got his driver’s license, registered to vote, and began paying taxes in Florida. At the same time, he spent most of his time in Washington, D.C., sometimes going to his MicroStrategy office in his corner of Tyson, Virginia, and “indulging in his social scene in the school district.” According to the complaint, “He was a ‘fool’ if his associates from New York, California, or the District similarly purchased homes in Florida and didn’t spend time there to dodge the personal income taxes they levied. even said it was. each state. ”

Informants have done extensive research to prove Thaler spends most of the year in Trigate and only a short amount of time in Florida. Thaler said he ran only three times in the general elections in Florida, using absentee ballots that were delivered from his headquarters in Virginia. The district lawsuit reproduces Thaler’s social media posts from 2012 after he claimed he was in Florida as evidence that he hasn’t moved. Posting a photo of Georgetown’s Pleasure Dome on Facebook during the final stages of joining Trigate. Taylor praised “my future home” in the caption, lamenting “how hard it is” to leave the house on a lovely fall morning.

The whistleblower’s lawsuit is based on social media posts, FAA flight data and, most interestingly, “his Gather evidence from ‘eyewitness accounts’ from the closest circles. Under Washington, D.C. law, time spent traveling for business or pleasure only to and from the district by a person does not constitute tax leave. collect there. According to the complaint, Saylor spent 270 days to 331 days in DC between 2014 and 2019. In his one year he has never stayed in Florida more than 71 days. Thaler, therefore, did not spend his 183 days in Florida as required to be considered a Florida resident. Tracking his movements shows that he spent most of his days physically he was either in DC or commuting to work. 2012 was the only exception. Still, Thaler spent 70 more days in DC than he did in Florida, so he also had to pay taxes there that year.

Thaler has a lot of lawsuits

Thaler allegedly forged a satanic deal with MicroStrategy to continue the deception, according to a district lawsuit. According to claims, the CFO determined Thaler did indeed live in DC in 2014 by tracking her days there and in Florida. His residence was listed as Florida by MicroStrategy for years, even on his W-2 for the CEO. Thaler is informed by his CFO (anonymous) that he can no longer “justify” hiding Thaler’s true residence. According to the complaint, “the CFO brought the matter of Thaler’s fraudulent tax evasion to Thaler as a potential cause of liability to the company.”

Thaler did not appease his CFO by agreeing to let MicroStrategy declare his real residence. Instead, the lawsuit alleges he devised a plan to enlist the company’s help to cover up the fraud, and he agreed to receive a modest salary of $1 each year going forward. According to the plan, such situations are less likely to attract the attention of DC tax officials. The advantages that MicroStrategy gave Sailors about personal air travel, car and driver use, and security details were also greatly enhanced. Federal taxes on these benefits were borne by the company. The risk of misreporting Thaler’s tax status is offset by increased benefits in exchange for no salary, to the relief of his CFO. The chairman of the audit and compensation committee is said to have approved the arrangement, according to the complaint.

In districts, these non-cash items are often considered rewards and are subject to full taxation. However, the profits have not been disclosed in his DC since Thaler claimed Florida residency. Apparently, Thaler and his CFO thought that substituting fringe for cash could keep the scam from being discovered. By concealing defendant Sailor’s continued failure to pay local taxes, the complaint argues that the agreement “[enabled] Defendant Thaler fraudulently evaded his obligation to pay local taxes. ”

District coverage is broader. Saylor alleges that he misrepresented his residence in Virginia for years before moving to Florida, AG claims Saylor paid his $25 million late tax, 10% annual interest, and various want to pay a fine. The new fraud law includes him triple the damages, so Sailor will have to pay triple the taxes, interest and fines if he loses. The exact amount Thaler owed was not specified in the complaint. Additionally, MicroStrategy is being sued for an undetermined amount. According to a press notice dated Aug. 31, AG estimates Thaler and the business will collectively spend about $100 million to settle the charges. Thaler will undoubtedly bear the brunt of the burden. Overdue taxes alone cost him three times as much, and in total he’s $75 million.

If the district wins the lawsuit, the whistleblower who allegedly witnessed Thaler boasting about his intelligence firsthand could get up to 25% of the settlement Thaler and MicroStrategy paid, or about $25 million. may be awarded.

Thaler responded to the lawsuit, saying, “Ten years ago, I bought a historic home in Miami Beach and moved my family there from Virginia. MicroStrategy is headquartered in Virginia, but I and my family lives in Florida, where I voted, served on a jury, and resides, I respectfully disagree with the District of Columbia’s position and expect a fair legal outcome.
MicroStrategy said in a statement that the lawsuit involves Thaler’s personal tax matters. The company was not in charge of his day-to-day operations, nor was he responsible for his personal tax obligations. Further, the Company did not assist Mr. Thaler in avoiding his personal tax liability.

MicroStrategy stock plunges in price

As of mid-afternoon on September 2nd, MicroStrategy’s stock price has fallen from $245 to $217 per share since the lawsuit was filed, down about 9%. But given Bitcoin’s failure and weak fundamentals, it’s actually not that bad. The business reported a startling operating loss of $918 million in its second quarter on Aug. 2. This includes his $903 million impairment charge from recovery of approximately 130,000 bitcoins. Most concerning, however, is the fact that the underlying software platform is currently in the red. Interest payments on his massive $2.4 billion debt amassed to buy bitcoin are more than a meager operating profit. Due to the poor performance Thaler stepped down as his CEO and took on the dual responsibility of Bitcoin acquisition strategy and more.
At current prices of just under $20,000 per coin, MicroStrategy has spent a total of $4 billion on Bitcoin, leaving the company’s war chest worth approximately $2.6 billion. This expenditure was funded by both new equity and debt. Thaler’s cryptocurrency risk thus cost him his $1.4 billion loss. Current holdings make him only $200 million more than his $2.4 billion bond loan that was used to finance the purchase. The first payment of the debt is scheduled for 2025. According to Ryan Ballentine of Bireme Capital, the firm shorting MicroStrategy, Saylor’s only chance to pay off the loan is if the price of Bitcoin continues to rise. He values ​​the business at just a few hundred million dollars. The software company is in the red and the net worth of Bitcoin he holds is less than $200 million. Considering that even positive operating income is eroded by the $40 million annual interest rate on Bitcoin debt, the chances of the software company becoming profitable in the future are slim. Taylor’s enormous leverage and bets on the part of the company that Bitcoin’s price would skyrocket despite months of sharp declines made the stock even more risky.

Curiously, MicroStrategy’s market capitalization has ballooned to $2.5 billion even after being hit by lawsuits. In mid-August he was sold for a staggering $4 billion. I still think that company is valued more than a really profitable business. So why defy gravity? Simply put, MicroStrategy is a memestock, a cult of Saylor that is particularly resilient as a result of his following. The lawsuit has not yet erased the following. But Thaler has turned what was once a viable business into a stand-in for the most risky and important investment vehicle of all time. The truth about the prophet who once pretended to be a prophet while pushing Bitcoin may soon be revealed. He’s actually the same carnival barker who fell off the stage after being accused of cheating his taxes while believing he had no chance of getting caught, and bragging about it to a whistleblower. can also come under attack from the market.

Related