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Overstock.com is facing a securities fraud class action lawsuit over market manipulation and insider trading by its founder Patrick Byrne.
Overstock.com (NASDAQ:OSTK), former online retail company-turned blockchain firm has been faced with a securities fraud class action lawsuit surrounding its founder, Patrick Byrne. Following the release of its first quarter 2019 financial results, Byrne allegedly was involved with market manipulation and insider trading prior to his departure from the company.
As quoted in the press release:
The Class Period commences on May 9, 2019, when the defendants published a release announcing purported results for the first quarter of 2019. The release announced that, after spending $100 million of shareholder funds over the last four years, Overstock’s tZERO product was ready to launch, and critically, that Overstock Retail department was performing so well that EBITDA guidance could be increased by 50%. As defendants explained in the release, the return of Overstock Retail to positive cash flow was imperative in supporting the launch of tZERO.
According to the complaint, on Sunday, September 22, 2019, MarketWatch published a report titled, “Overstock founder tried to squeeze short sellers, then sold out when the SEC cracked down.” The report stated, in part, “One of Patrick Byrne’s last acts at Overstock.com Inc. appears to have forced a short squeeze that warranted the attention of the Securities and Exchange Commission, and the sell-off of his entire stake over the last three days is now raising questions about whether he tried to manipulate the market.” The report also noted the implications of the unusual timing and amount of defendant Byrne’s stock sales. The report concluded, “[e]ven if Byrne escapes charges of market manipulation or insider trading, this is still a horrible look: Amid an ongoing investigation by the SEC’s enforcement division into Overstock’s tZERO platform and its token offering, the chief executive quit and sold his entire stake while seemingly hiding out in an unidentified Asian country, with plans to invest the money in ways that it may not be recoverable by U.S. authorities.”
Click here to read the full press release.