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The first case to use a new whistleblower rule was made public on Wednesday. It showed that the District of Columbia attorney general is suing Michael Saylor, the founder and executive chairman of software intelligence company MicroStrategy (MSTR), for allegedly trying to avoid paying more than $25 million in taxes. The lawsuit, which was covered on network TV news, has made people worry that MicroStrategy and/or Saylor might have to sell some of their bitcoin, which would bring down the price of the cryptocurrency.
"Because MicroStrategy is one of the biggest Bitcoin holders, crypto investors started to worry about whether Michael Saylor would have to sell some Bitcoin to pay for the fines," Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, wrote in a note.
For now, there are a few reasons why the fears seem to be overblown. But this should serve as a reminder to crypto supporters that they should pay their taxes in full, even if they have assets that can't be taken away. Tax avoidance schemes are legal loopholes, but require significant planning and commitment. This year, CoinDesk put out a complete guide to cryptocurrency taxes.
Also, the U.S. government is showing more interest in keeping an eye on the cryptocurrency industry and is changing the way the Internal Revenue Service works, so it's safe to assume you're being watched.
The lawsuit claims that Saylor has been cheating Washington, D.C. out of taxes for the past ten years by saying he lives in Virginia and Florida, which have lower taxes. After getting a tip, investigators tracked Saylor's private jet flight records, social media posts, and conversations with Saylor's peers in which he was said to have called people "fools" for paying their income taxes. This led them to the opposite conclusion.
The court document doesn't say how much Saylor may have to pay if he or she is found guilty. But he would have to pay all unpaid Washington, D.C., taxes for eight years, plus 10% interest every year, a separate $11,000 civil penalty for each violation, and other fines for fraud. The Office of the Attorney General says that could add up to more than $100 million.
People tend to mix up the former MicroStrategy CEO, who stepped down last month, with his company when they worry that this move could cause a liquidity crisis in bitcoin (BTC). First, the government has to win its case, which could mean using the new False Claims Act in an unfair way, according to one expert quoted by the Wall Street Journal.
It also assumes that Saylor couldn't pay off a multimillion-dollar debt, that he would sell his BTC instead of one of his mansions or yachts, and that he would dump it on the market instead of selling it in small amounts to avoid slippage. The government must also show that Saylor's plan has something to do with MicroStrategy.
The attorney general says that in 2014, MicroStrategy's then-chief financial officer was "uneasy with this trickery" and talked to Saylor about how the company could be held responsible for Saylor's personal tax evasion. MicroStrategy replied that Saylor's lawsuit was a "personal tax matter" and that it had nothing to do with "his day-to-day affairs."
Saylor also denied the claims and said again that he lives in Florida and not in a historic mansion in Georgetown or on a yacht in the Potomac River, as was said.
Because MicroStrategy is so important to bitcoin as a whole, people are afraid that upcoming payouts to Mt. Gox depositors will crash the price. The company spent about $4 billion to buy BTC, making its stock a real bitcoin exchange-traded fund (ETF) (ETF). But the company still has a lot of money and has been making money for a long time. Reps for the company said that the price at which it would sell its bitcoins is around $3,000.
Is it impossible for a former CEO who was convicted of accounting fraud to do any of these things? Who told people to sell their homes so they could buy bitcoin? That used his company's Bitcoin stockpile as a loan? I mean, let the courts decide, not Facebook. Saylor, being Saylor, is said to have called the District of Columbia "the most powerful city on Earth" at one point. He likes to say more than he needs to.
The worst thing that could happen is that more people want to sell bitcoin than usual, but that seems unlikely given Saylor's commitment to the network. Even though this fear isn't very common, it seems like the kind of pessimism that happens during bear markets, when investors are nervous and start to think that another crisis is sure to happen.
One thing is certain: anyone who isn't close to being a jerk should just pay their taxes. Or check out the theory of flags.
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