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   Strategies & Market TrendsAnthony @ Equity Investigations, Dear Anthony,


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From: scion8/16/2019 4:43:23 AM
1 Recommendation   of 121951
 
General Electric shares tank following accusation of 'bigger fraud than Enron'

Share price plummets as Madoff whistleblower Harry Markopolos claims company is engaging in $38bn accounting fraud

Dominic Rushe in New York @dominicru Thu 15 Aug 2019 19.42 BST
theguardian.com

The whistleblower who exposed Bernard Madoff’s Ponzi scheme has accused General Electric of wide-scale fraud, sending the US conglomerate’s share price into a tailspin.

In a report titled General Electric, a Bigger Fraud Than Enron, the investigator, Harry Markopolos, claims GE is engaging in accounting fraud worth $38bn. He said GE was heading for bankruptcy and was hiding $29bn in long-term care losses.
gefraud.com

“GE’s $38bn in accounting fraud amounts to over 40% of GE’s market capitalization, making it far more serious than either the Enron or WorldCom accounting frauds,” Markopolos wrote, referencing two of the largest corporate scandals in history.


After a year-long investigation for an unidentified hedge fund, Markopolos said he had discovered “an Enronesque business approach that has left GE on the verge of insolvency”. Enron, a Texas-based energy group, filed for bankruptcy in 2001, brought down by a huge accountancy scandal.

This report is “going to make this company probably file for bankruptcy”, Markopolos told CNBC’s Squawk on the Street. “WorldCom and Enron lasted about four months … We’ll see how GE does.”

In a statement, GE said it “stands behind its financials” and operates to the “highest level of integrity” in its financial reporting. “We remain focused on running our business every day and will not be distracted by this type of meritless, misguided and self-serving speculation.”

GE’s share price sank close to 15% after the report was released.

General Electric is already under investigation by the Securities and Exchange Commission (SEC), the US’s top financial watchdog, and the justice department over accounting irregularities related to its insurance and power divisions.

Once the world’s most valuable company, GE has struggled in recent years. The former chief executive and chairman John Flannery was abruptly removed last year after only a year on the job and replaced by Lawrence Culp, once the head of the Danaher conglomerate.

On Thursday, Culp dismissed Markopolos’s report. “GE will always take any allegation of financial misconduct seriously. But this is market manipulation – pure and simple,” he said.

Markopolos is best known for his role as the whistleblower who warned the SEC about Madoff’s Ponzi scheme. Madoff was jailed for 150 years in 2009 after pleading guilty to swindling investors out of $65bn in savings.


theguardian.com

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To: StockDung who wrote (121919)8/22/2019 12:22:45 PM
From: Glenn Petersen
4 Recommendations   of 121951
 
Overstock CEO Patrick Byrne resigns following 'deep state' comments

August 22, 2019
Annie Palmer @annierpalmer
CNBC.com
-- Overstock CEO Partick Byrne has resigned from the e-commerce company after making controversial comments about his role in the "Deep State."

-- Shares of Overstock were halted on Thursday.

Overstock CEO Partick Byrne has resigned from the e-commerce company after making controversial comments about his role in the "deep state." Shares of Overstock were halted pending the news.

"In July I came forward to a small set of journalists regarding my involvement in certain government matters. Doing so was not my first choice, but I was reminded of the damage done to our nation for three years and felt my duty as a citizen precluded me from staying silent any longer," Byrne said in a statement. "...Though patriotic Americans are writing me in support, my presence may affect and complicate all manner of business relationships, from insurability to strategic discussions regarding our retail business."

"Thus, while I believe that I did what was necessary for the good of the country, for the good of the firm, I am in the sad position of having to sever ties with Overstock, both as CEO and board member, effective Thursday August 22," he added.

Last week, Byrne released a statement responding to claims in a blog post of his involvement in the federal government's investigation into the 2016 election. In it, he referred to federal agents as the "Men in Black" and said he assisted in investigations related to the Clintons and Russian interference.

In an interview with The New York Times, Byrne claimed he was romantically involved with Maria Butina, the Russian operative who used her NRA activism to infiltrate American politics. She was later sentenced to 18 months in prison.

Read the full letter from Byrne below:

Dear Shareholders,

In July I came forward to a small set of journalists regarding my involvement in certain government matters. Doing so was not my first choice, but I was reminded of the damage done to our nation for three years and felt my duty as a citizen precluded me from staying silent any longer. So, I came forward in as carefully and well-managed fashion as I could. The news that I shared is bubbling (however haphazardly) into the public. Though patriotic Americans are writing me in support, my presence may affect and complicate all manner of business relationships, from insurability to strategic discussions regarding our retail business. Thus, while I believe that I did what was necessary for the good of the country, for the good of the firm, I am in the sad position of having to sever ties with Overstock, both as CEO and board member, effective Thursday August 22.

This possibility or even likelihood has been forefront of my mind for just over a year, since certain news became public in July 2018. On July 15 of this year, in the expectation that I might be gone before our recent (August 8) earnings call, I wrote my most detailed letter to shareholders in a long time. Here are the key points from that letter that you should know as a shareholder:

  1. I think the blockchain revolution will reshape key social institutions. We have designed and breathed life into perhaps the most significant blockchain keiretsu in the world, a network of blockchain firms seeking to revolutionize identity, land governance (= rule of law = potential = capital), central banking, capital markets, supply chains, and voting. In three of those fields (land governance, central banking, and capital markets) the word "trillions" comes up when calculating the disruptive opportunity of blockchain. In those three fields, our blockchain progeny (Medici Land Governance, Bitt, and tZERO, respectively) are arguably the leading blockchain disruptors in existence.
  2. Retail
    We face a competitor who (by the end of this year) will have lost close to $3 billion, and who announced recently it will seek to raise another $750 million, and who will be able to cover its expenses when the two lines in the graph intersect (cf. below right).
    After my ill-fated experiment last year in copying our competition's strategy, our retail business has recovered to a state of positive adjusted EBITDA (cf. graph on left).

    A Media Snippet accompanying this announcement is available by clicking on the image or link below:

    Leadership – We have the most solid Retail leadership team we have ever had. Our ab initio redesign of our executive structure starting a year ago has led to a better integration of all functions and proper management thereof than we have ever achieved in our history.

    Chief Marketing Officer JP Knab is the greatest master of Digital Marketing I have ever met. I will miss watching Commander Data find new arbitrage.

    Kamelia Aryfar is a data scientist and Machine Learning specialist of some renown: Dr. Aryfar originally cut her teeth at Etsy, and in her two years with us has led the Machine Learning overhaul of our company, (through which we are 40% complete).

    The integration of Skynet (Kamelia's name for her AI creation) continues across Marketing and Sourcing, and as it augments decisioning, we discover ways to find continuous gains.

    In recognition of the importance that Machine Learning is coming to play in our world, Kamelia has been named Executive Vice President and has also been appointed to the company's board of directors. She is an extraordinary asset to the firm and she will do big things for you shareholders in the future.

    Dave Nielsen is one of the few OG retailers I ever met who made the prop-to-jet conversion. He is as able as they come and is widely admired within the firm. He has already been serving as President and has been a big part of our radical improvement in bottom line this year. He is a true adult. He knows the mission is to continue providing the space and resources for Kamelia, JP and others to keep bringing in those multi-tens of million-dollar improvements in Retail bottom line by focusing on making our Retail site a gem technologically and leave the multi-billion losses to others.

    Over the last three years, Jonathan Johnson has done an extraordinary job of converting a mishmash of entrepreneurs, term papers, and your capital, into the most remarkable keiretsu of well-formed blockchain firms in the world. He has proven himself to be an extremely capable partner who gets the vision. I welcome that he will be serving as CEO of your entire public company. You could not have a more stable, prudent leader. The reason we have been such good partners is that Jonathan is the exact opposite of me in many respects. No doubt that may be welcome in some quarters. He has the keiretsu, he has the roadmap, he understands that the goal is to nurture the keiretsu to its full potential while permitting the Retail business to focus all its efforts on technological perfection rather than loss accumulation.

  3. Strategically:

    We have removed the pistol from our temple. I believe in the near future the cash generated by Retail going forward should be adequate for funding both Retail's ongoing innovation (we caught the Machine Learning wave just right here, and have a first-rate team that is reinventing the company from an ML perspective), and nurturing to maturity our keiretsu of blockchain firms, especially tZERO, Medici Land Governance, and Bitt (well, and Voatz, too) – particularly with the possibility of their becoming less of a cash burn, either through outside investments, or from the fact that their products (e.g., tZERO's) are reaching the market.

    Retail:

    In the course of discussions with brick-and-mortars last year, when we filled out their models with our data, we would generally discover that if we were part of a brick-and-mortar chain with a national footprint there could be ˜$200 million in annual savings (primarily but not exclusively in logistics). On the other hand, if joined to certain sites with high traffic but which have not cracked the monetization nut, models showed that, combined with us, there might be savings of ˜$150 - $200 million.

    In the absence of some such hybridization, I think that just by continuing to get supply-chain-smarter we can find ˜$40 million of those savings on our own over 12-18 months. We have introduced Advertising Technology this summer which will generate (I believe) a similarly attractive number over the same time frame. So, assuming Retail does $115 - $120 millionbetter on the bottom line this year than last (our range of estimates), expecting it next year to make multiple tens of millions of dollars in bottom line improvements again seems reasonable to me.

    As you know, I do think that the Gods of Economics believe some such hybridization of business models is to be done. That could take many forms, from cooperative partnerships with a brick-and-mortar, to an acquisition (for a fund with ambition, the ultimate form might be a stack of all three layers and a recovery of perhaps ˜$300 million in bottom line while establishing something unique).

    Collectively - The best thing to do for shareholder interest is to use cash flow to mature our blockchain keiretsu firms to fruition while we keep running our Retail business focusing on refining it as an exquisite gem of a technology platform, rather than again trying to go head-to-head with any firm in the process of dropping billions of dollars in losses. Refining that technological gem is what brings value to brick-and-mortars for whom we represent a way to leap to the front of the pack technologically. If the right strategic offer is made that reflects the value of that technological gem, I am confident the board will consider it. It is possible that my absence will advance the possibility.

    On any normal day, my presence is not conducive to strategic discussions regarding our retail business. I believe that going forward my presence will definitelynot be conducive to such strategic discussions. And if the hors d'oeuvre that was served recently caused the market such indigestion, it is not going to be in shareholder interest for me to be around if and when any main course is served.
It has been an honor to serve you through thick and thin, threats grand and arcane, for the past 20 years. You own some disruptive assets herein. One of them changed how furniture gets purchased in the United States and has run up a record of GAAP profitable years that is nearly unrivaled in B2C eCommerce, on a fraction of the capital of every competitor they ever faced (a fact missed by most). And you own blockchain assets that seem poised to revolutionize capital markets, finance, and governance for the poor. It has been 20 years of remarkable innovation from a team that is now honed for it.

Coming forward publicly about my involvement in other matters was hardly my first choice. But for three years I have watched my country pull itself apart while I knew many answers, and I set my red line at seeing civil violence breaking out. My Rabbi made me see that "coming forward" meant telling the public (not just the government) the truth. I now plan on leaving things to the esteemed Department of Justice(which I have doubtless already angered enough by going public) and disappearing for some time.

I wish all shareholders a smooth and level road… And don't forget to shop Overstock.com!

Your humble servant,
Patrick M. Byrne

cnbc.com

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To: Glenn Petersen who wrote (121922)8/22/2019 4:14:10 PM
From: StockDung
2 Recommendations   of 121951
 
The Exclusive Inside Story Of The Fall Of Overstock’s Mad King, Patrick Byrne



Lauren Debter Forbes Staff

Retail
I write about all things retail.

<div _ngcontent-c15="" innerhtml="Earlier today, Patrick Byrne, the founder and longtime CEO of former e-tailing giant Overstock.com, resigned, saying his involvement as a federal informant in the investigation of infamous Russian spy Maria Butina made performing his duties impossible. That’s not the whole story. This is.

It’s early May and Patrick Byrne has just gotten off the phone with hip-hop artist Akon and is roaming barefoot in the elegant three-room suite on the top floor of the Jefferson hotel, a stone’s throw from Embassy Row in Washington, D.C. He grabs a Diet Coke, a pack of gummy bears and some M&Ms from a minibar hidden in a tasteful armoire, settles on a plush cream-colored sofa and begins to boast about the circumstances around which the Senegalese-American celebrity sought him out. “I hear he’s a musician. We share ambitions for Africa,” says Byrne, popping a gummy bear into his mouth.

Byrne, who bought Overstock.com in 1999 and ran it for two decades, has always been a man of many ambitions. High on his list: transforming the African continent and its 1.3 billion people via blockchain technology. Like an informercial for the nascent decentralized, distributed ledger technology that underlies cryptocurrencies like bitcoin, he waxes poetic about a future in which corruption is wiped out, people are freed from poverty and developing nations can leapfrog ahead by putting government functions like voting, property records and central banking on the blockchain. Characteristically low on his priority list: The economic interests of the thousands of shareholders in his publicly traded, former e-tailing giant.

For the last several years, Byrne, 56, spent no fewer than 220 days a year on the road spreading his blockchain gospel, despite the fact that Overstock was hemorrhaging cash. “Over the next five years, we can change the world for 5 billion people,” says Byrne. “Well, at least a billion. Maybe 5 billion.”

Byrne is vague about why he is in the nation’s capital this week and mentions a meeting with representatives from Africa about his blockchain projects. However, he later reveals that he had been meeting with the Department of Justice. Byrne claims he’s been serving as a government informant, feeding information since 2015 to the “Men In Black,” as he puts it, on Maria Butina, a vivacious Russian grad student with whom he struck up a romantic relationship. She is currently serving an 18-month prison sentence after pleading guilty to conspiring to act as a foreign agent, in connection with her efforts to infiltrate conservative political circles before and after the 2016 presidential election.

In his resignation letter, Byrne cited his involvement in “certain government matters” as complicating “all matters of business relationships from insurability to strategic discussions regarding our retail business.” Byrne says what he has done (exactly what that was remains unclear) “was necessary for the good of the country, for the good of the firm.” Byrne concludes his letter by stating cryptically:

“Coming forward publicly about my involvement in other matters was hardly my first choice. But for three years I have watched my country pull itself apart while I knew many answers, and I set my red line at seeing civil violence breaking out. My Rabbi made me see that ‘coming forward’ meant telling the public (not just the government) the truth. I now plan on leaving things to the esteemed Department of Justice (which I have doubtless already angered enough by going public) and disappearing for some time.”

In a call from his car after delivering a farewell speech to his surprised employees, Byrne said he had his bags packed. “I will be sitting on a beach in South America shortly, and that is all I want to think about,” he says. “I want to focus on getting back into good shape, doing yoga and becoming a vegetarian.”

Welcome to Patrick Byrne’s bizarre world. The existential crisis Byrne is putting his Salt Lake City-based company through comes after an impressive career pioneering e-commerce. Nearly two decades ago, Byrne was lauded as “The Renaissance Man of E-Commerce.” The closeout store he took control of in 1999 for a mere $7 million was on its way to becoming an e-tailing phenom and eventually came to command a market capitalization of $2.2 billion. But in the hyper-competitive digital age, disruptive business models don’t last long, and today Overstock—once an innovator—is a has-been.

This isn’t any secret. By the time of his resignation, Byrne had all but given up trying to compete with the likes of Amazon and Wayfair, and he had spent the last two years unsuccessfully attempting to unload Overstock’s retail business. Just as e-commerce captivated Byrne at the turn of the millennium, blockchain was his shiny new obsession. So Byrne funneled Overstock’s dwindling resources into blockchain ventures—more than $200 million since 2014. About 30% of that sum went into 18 early-stage companies that are building a suite of blockchain technology products he wanted to sell to governments. The rest has been seemingly squandered on a personal vendetta: Overstock is creating a blockchain version of Nasdaq, which Byrne believed could right some the evils of Wall Street—particularly the naked short-selling that he claims plagued his company for much of the last 15 years. Byrne attracted an eclectic mix of allies to his corner doing what he calls “God’s work,” ranging from Akon and the World Bank to the infamous short-seller Marc Cohodes and the city of Denver.


Patrick Byrne at Overstock's headquarters

Tim Pannell for ForbesBut the walls closed in on Byrne’s quixotic adventure. Overstock’s heavily shorted stock plummeted from $87 in the beginning of 2018 to about $20 today as some $1.5 billion in market capitalization has evaporated. Once reliably profitable, Overstock lost $206 million last year and $110 million in 2017. In recent months, Byrne fired some 400 people.

Even worse were the cracks forming in Overstock’s new strategy. The company’s prized crypto offering, Tzero, is the subject of an SEC investigation, and a highly-anticipated private equity investment into the exchange has withered away. Its blockchain investment arm, Medici Ventures, has yet to generate meaningful revenues and racked up losses of $61 million in 2018. With many big companies now embracing blockchain technology—including a bold new plan from Facebook—Byrne’s strategy shift to blockchain suddenly looks as challenging as Overstock’s online retailing business.

Eventually even Byrne’s most loyal shareholders—blockchain believers among them— were in open revolt. Fumed Byrne in May, after investors bombarded him with calls and emails when he sold 900,000 shares of stock, “Frankly, I had no idea that shareholders would demand explanations of why and how I might want to use my cash derived from my labor and my property to pursue my ends in life.”

Byrne is the son of the late John “Jack” Byrne, a University of Michigan-trained mathematician and renowned insurance executive credited with turning around Geico in the mid-1970s and persuading Warren Buffett to invest in the auto insurer. Geico would eventually become one of the biggest contributors to Berkshire Hathaway’s bottom line, and Buffett once described Byrne’s father as “the Babe Ruth of insurance.” When Byrne was in middle school, he gravitated toward his father’s friends. Bethesda neighbor Gordon Macklin, the president of Nasdaq from 1975 to 1987 (and later the chairman of San Francisco investment bank Hambrecht & Quist), would drive Patrick to school regularly. Buffett was an occasional house guest, and Byrne’s parents would allow him to skip school to spend time with the investment maven.

Says Byrne, “My mom would get a case of Pepsi, and Buffett, who is a teetotaler, always carried a hip flask of cherry syrup like a drunk. We’d sit there and over an afternoon polish off 18 Pepsis.”

Byrne’s father later went on to turn around American Express’s Fireman’s Fund and eventually created his own insurance holding company, called White Mountains Insurance. His stake, worth hundreds of millions at his retirement in 2007, formed the basis of the family’s wealth.

Patrick was the youngest and most precocious of Jack’s three sons. In 1981, he headed to Dartmouth to study philosophy and Asian studies. Shortly after his graduation, he was diagnosed with testicular cancer. After treatment, he celebrated with a cross-country bicycle ride with his two older brothers. The cancer would come back two more times in quick succession and keep him in the hospital for much of his 20s. To keep his mind occupied while he was bedridden, he began pursuing a graduate degree in mathematical logic from Stanford. In 1988 he headed to Cambridge University as a Marshall Scholar and eventually received his philosophy doctorate from Stanford. Byrne speaks Mandarin and several other languages and once translated Lao Tzu’s Tao Te Ching (The Way Of Virtue) into English. “I was one of those guys who actually studied philosophy because I was trying to figure out man’s place in the universe,” says Byrne, whose dissertation explored the virtues of limited government and drew from libertarian Robert Nozick’s Anarchy, State and Utopia.

Despite his years in academia, Byrne pivoted hard to the pursuit of wealth in the late 1980s. “I had grown up in a very business-oriented household … I never anticipated staying in a university setting,” he says. In 1987 he bought a bankrupt hotel with his older brother called the Inn at Jackson Hole for about a million dollars, which they sold several years later for $4 million. In 1989, they started buying distressed consumer debt at 5 cents on the dollar during the S&L crisis. In 1991, Byrne led a $1 million investment into the development of the Red Dolly Casino in Colorado, which was sold three years later for $5 million. He also invested in distressed strip malls, office space and apartment buildings across the country. His dad often loaned his sons money and in later years put up mezzanine capital, collecting a preferred, 15% return and half as much equity.

Nothing kept Byrne’s attention very long. In 1994, he led an investment into Centricut, a New Hampshire-based industrial torch-part manufacturer, and served briefly as CEO when the current management fell ill. In 1997, he left to run Berkshire Hathaway’s Fechheimer Brothers, which made uniforms for police, firemen and military. In 1999, seeing an opportunity to sell leftover inventory online, his investment holding company, High Plains Investments LLC, acquired a majority stake in D-2 Discounts Direct for $7 million. He renamed it Overstock, and when 55 venture capitalists declined to fund the company’s growth, he turned to friends, family and his own checkbook. His timing was perfect. The company began scooping up inventory from bankrupt dot-coms, whether it was consumer electronics, jewelry or sporting goods, then selling it on the cheap. In 2002, Overstock’s revenue hit $92 million and Byrne took the company public via a Dutch auction, which allows investors (not bankers) to set prices for the stock offering themselves. (Google went public the same way.)

By 2005, the company’s stock, which had skyrocketed post-IPO, began to slide as its losses widened. Byrne became convinced it was because of naked short-selling, an illegal practice in which investors sell shares in a company without actually borrowing the shares, typically using leverage. In a now-infamous August 2005 conference call, he ranted about how hedge funds, journalists and regulators were conspiring to push down the company’s stock price under the direction of some faceless menace he called the “Sith Lord.” Overstock sued short-selling hedge fund Rocker Partners and research firm Gradient Analytics, which had been critical of the company. Then, in 2007, he filed a $3.5 billion lawsuit against 11 of the biggest banks on Wall Street (Goldman Sachs, Morgan Stanley and Credit Suisse among them), accusing them of participating in a “massive, illegal stock market manipulation scheme” that distorted the company’s stock price by facilitating naked short-selling.

The crusade cost him two directors, plus the confidence of his father, who threatened to step down from the board because he believed his son was distracted from Overstock’s core business. The litigation dragged on for over a decade and resulted in a handful of settlements, including a $20 million payment from Merrill Lynch in 2016. “I think he won the battle but lost the war when it came to naked short-selling,” says Tom Forte, long the lone analyst still covering the stock. In the years Byrne spent chasing short-sellers, Overstock’s stock sagged and revenue drifted slowly upward, hitting $830 million in 2008, $1.3 billion in 2013 and $1.8 billion in 2018. And while the company never racked up massive losses like Amazon or Wayfair, as Byrne likes to point out, its profitability has been modest. Overstock broke into the black in 2009, then eked out small profits for the next seven out of eight years.


Maria Butina

The Associated PressIn 2017 and 2018, as Byrne shifted his attention to expanding in crypto and blockchain, the company began bleeding red ink—a whopping $316 million over two years, which is more than twice the profits Overstock has ever delivered. Byrne chalked his market share declines up to competitors with seemingly endless piles of cash to blow through. “The thing I never anticipated … was that I would be in an industry that tolerated people losing $500 million, $1 billion or $3 billion forever. We started drawing copycats who came in and seemed to have unlimited capital,” he says, not hiding his disdain for and jealousy of Wayfair.

However, former employees say Byrne was distracted by his short-selling crusade and failed to take competitors seriously. Internally Byrne’s ADD management style—enthusiastically starting up new projects but then losing interest—has been jokingly referred to as the Overstock “ovolution.” In 2004, the company spent a couple of million to develop an online auction platform akin to eBay, but it struggled to turn a profit and was shut down in 2011. (Byrne later said he wished he hadn’t abandoned it.) In 2014, Overstock invested $400,000 to facilitate pet adoptions by working with shelters, which it still runs but describes as a “public service.” The company started selling home, auto and small business insurance in 2014, too, which Byrne described as “a long-term play” before trashing it as not doing “particularly well” three months later.

“Patrick gets very focused on something, and then when he sees the financials didn’t work out, he basically forces layoffs,” says Chad Huff, a former software developer. “Initiatives would get started, then shelved. Or they’d be half done and not in a great state but rolled out anyway.”

Acouple of months before his resignation, as sheets of rain blanket Overstock’s new headquarters at the base of Utah’s Wasatch Mountains—a building designed to resemble a peace sign when viewed from above—Byrne has finished sitting through a scheduled business luncheon and gone missing. Several minutes later, after his assistant tracks him down, he glides into his office, where posters of Bob Marley and Pulp Fiction give it a dorm-room feel. He sits down and begins ruminating on his two decades running Overstock. “It’s kind of imagination land,” says Byrne, dressed in a black long-sleeve T-shirt, jeans and tennis shoes.

Strangely, Byrne’s Overstock was long immune from activist shareholder campaigns and boardroom coups and what ultimately prompted his sudden departure is still murky. Investors like Marc Cohodes had called for Byrne to step aside as CEO and move into a chairman position. Despite recent stock sales, Byrne remains the company’s largest shareholder, with a 14% stake and says he wasn’t pushed out. “This is not about pressure from shareholders. The only pressure—or actual issue— was that the insurance companies were having conniptions,” he says.

Byrne began chasing crypto in late 2013 when he asked dozens of staffers to work over the holiday break to fast-track a bitcoin payment feature. The price of bitcoin had skyrocketed that year from about $13 to more than $1,000, and in January 2014, Overstock became the first major retailer to accept bitcoin as payment.

Before long, Byrne began tapping Overstock’s balance sheet to fund bigger and bigger blockchain initiatives. The crown jewel: a digital stock exchange called Tzero, which is seeking to allow investors to trade so-called security tokens that represent traditional securities, like stocks, bonds, real estate, private equity and art on the blockchain. Proponents say this will improve access and liquidity for certain investments, plus cut down settlement times for stocks and bonds from up to two days to mere seconds. A bonus: The system would make naked short-selling impossible because there is no longer a lag time between a buy and sell order.

On the plus side, Tzero has satisfied a set of fearsome regulatory requirements, most notably acquiring a company licensed as an alternative trading system. The problem is, with just two tokens—representing Overstock’s and Tzero’s own shares—available to trade on Tzero’s platform, almost no one uses it. The company says it is aiming for 5 to 10 tokens by the end of the year. In May, it announced partnerships with Saudi real estate giant Emaar Properties, to list $2 billion in real estate, and Securitize, a startup that packages regular assets into digital tokens that can be traded on the blockchain. While it hopes to generate revenues from listing fees, trading commissions, interest on lending assets and more, it first needs to create liquidity by attracting quality issuers and investors to its platform.

Byrne was also developing a securities lending platform as part of Tzero, which would connect asset-rich institutional investors like pension funds (who make money by lending their stock) directly with short-sellers (who borrow stock to make trades). Both parties stand to benefit from lower fees, plus will receive a blockchain-enabled digital locate receipt that proves the shares have actually changed hands. The service takes dead aim at banks like Goldman Sachs and Morgan Stanley, which currently sit in the middle of these transactions. It’s been tried before: A company called Quadriserv created a similar stock lending platform named AQS in 2006, but alleged in a recent lawsuit that banks conspired to “boycott AQS and starve it of liquidity.” In 2016, AQS was sold in a fire sale for $4 million.

“It’s the last great business on Wall Street,” says Byrne. “Pension funds are going to understand they have been deprived of tens of billions of earnings a year. That money is turning into Maybachs in the Hamptons.”

At the company’s annual shareholder meeting in May, Byrne fielded tough questions from investors. While the price of bitcoin had climbed some 60% in the last five months, Overstock’s shares continued to slide. And after months of delays, Overstock just dropped a bombshell: Tzero would receive a measly $5 million in the form of Chinese renminbi, U.S. dollars and other Hong Kong-traded securities from Asian investment firm GSR Capital, after the company originally touted a deal size of as much as $404 million.

Over time Byrne developed a dilettante’s reputation for overpromising and underdelivering. In 2016 Byrne boldly told investors that Overstock would be issuing the world’s first equity security using the blockchain. “The history of capital markets is entering a new era,” he said. Byrne personally ended up buying 50% of the $2 million preferred stock offering.

In 2017, Byrne announced a joint venture with Peruvian economist Hernando de Soto Polar that would “challenge global poverty and inequality” by creating a blockchain-based global land registry. But when the two couldn’t agree on terms, Byrne ended up contributing $7 million of his personal capital to take a 43% stake in the newly formed Medici Land Governance.

Overstock began exploring a sale of its retailing business in 2017, but to date no buyers have materialized. There was also Tzero’s troubled “initial coin offering,” which set out to raise $250 million but, ultimately as crypto prices were dropping, generated $105 million in August 2018 at an expense of $21.5 million to corporate parent Overstock. The offering is now being investigated by the SEC as part of a broader ICO crackdown.

Many investors grew tired of Byrne’s promises. “Basically, every initiative they put forward, they promised or signaled to the market that this is an incredible layup and they will get it done in three to six months,” says Kevin Mak, a lecturer at Stanford Business School who invested in the company in 2017 and sold his shares last fall. “I ultimately exited when I found that the information I was getting from management was no longer—I want to pick the right words—reliable.”

In the end, Byrne was forced to spend a considerable amount of time hunting for fresh funds to keep his dream alive. In November 2017, Overstock borrowed $40 million from his mother and brother at an interest rate of 8%. Over the next few months, during the height of crypto-mania, the company received $150 million from two investors, including George Soros, after they exercised warrants in exchange for stock (the investors have since dumped their shares). In August and September 2018, the company raised another $95 million by issuing new shares of common stock in an “at the market” offering.

The problem is, unlike most companies that buy back shares as prices decline, Overstock is selling, diluting the company’s equity. Shares outstanding have climbed to 35 million from 25 million in the last two years. In the first quarter of 2019 Overstock committed to another quick stock sale, raising $31 million to partially offset a $51 million cash burn.

Meanwhile, Overstock’s original business is running on fumes. “It was kind of a fight to run retail because it was never his priority,” says Stormy Simon, former president of the operation who left in 2016. Since then, there have been several rounds of layoffs in the retail business, leaving a raft of empty desks in Overstock’s new $100 million headquarters. And yet, to his blockchain staffers, Byrne was like Daddy Warbucks. Tzero CEO Saum Noursalehi was paid $4.8 million last year, while his brother and Tzero vice president Nariman earned $1 million. Tzero chief technology officer Amit Goyal made $1.8 million—and his brother Sumit earned an additional $765,000.

In Overstock’s recent quarterly filings, it indicates that it should be able to fund its current obligations for another 12 months, but after that, additional capital may be needed “to be able to fully pursue some or all of our strategies.” The ominous disclosure seems to have had little effect on Overstock’s languishing shares, because by now many investors have given up on the company.

Byrne never showed much respect for Wall Street or small-minded shareholders—and maybe that’s what got him in the end. “We’re like a Russian icebreaker trolling across the Arctic icefield. It’s three or four yards at a time and enormously expensive,” says Byrne. “When you’re talking about the kinds of numbers we’re talking about and freeing up trillions of capital … I think there is going to be so much money in it it’s kind of silly to try and model it.”

Photograph by Tim Pannell for Forbes

Get Forbes’ daily top headlines straight to your inbox for news on the world’s most important entrepreneurs and superstars, expert career advice, and success secrets.

" style="box-sizing: border-box; width: 700px;">Earlier today, Patrick Byrne, the founder and longtime CEO of former e-tailing giant Overstock.com, resigned, saying his involvement as a federal informant in the investigation of infamous Russian spy Maria Butina made performing his duties impossible. That’s not the whole story. This is.

It’s early May and Patrick Byrne has just gotten off the phone with hip-hop artist Akon and is roaming barefoot in the elegant three-room suite on the top floor of the Jefferson hotel, a stone’s throw from Embassy Row in Washington, D.C. He grabs a Diet Coke, a pack of gummy bears and some M&Ms from a minibar hidden in a tasteful armoire, settles on a plush cream-colored sofa and begins to boast about the circumstances around which the Senegalese-American celebrity sought him out. “I hear he’s a musician. We share ambitions for Africa,” says Byrne, popping a gummy bear into his mouth.

Byrne, who bought Overstock.com in 1999 and ran it for two decades, has always been a man of many ambitions. High on his list: transforming the African continent and its 1.3 billion people via blockchain technology. Like an informercial for the nascent decentralized, distributed ledger technology that underlies cryptocurrencies like bitcoin, he waxes poetic about a future in which corruption is wiped out, people are freed from poverty and developing nations can leapfrog ahead by putting government functions like voting, property records and central banking on the blockchain. Characteristically low on his priority list: The economic interests of the thousands of shareholders in his publicly traded, former e-tailing giant.

For the last several years, Byrne, 56, spent no fewer than 220 days a year on the road spreading his blockchain gospel, despite the fact that Overstock was hemorrhaging cash. “Over the next five years, we can change the world for 5 billion people,” says Byrne. “Well, at least a billion. Maybe 5 billion.”

Byrne is vague about why he is in the nation’s capital this week and mentions a meeting with representatives from Africa about his blockchain projects. However, he later reveals that he had been meeting with the Department of Justice. Byrne claims he’s been serving as a government informant, feeding information since 2015 to the “Men In Black,” as he puts it, on Maria Butina, a vivacious Russian grad student with whom he struck up a romantic relationship. She is currently serving an 18-month prison sentence after pleading guilty to conspiring to act as a foreign agent, in connection with her efforts to infiltrate conservative political circles before and after the 2016 presidential election.

In his resignation letter, Byrne cited his involvement in “certain government matters” as complicating “all matters of business relationships from insurability to strategic discussions regarding our retail business.” Byrne says what he has done (exactly what that was remains unclear) “was necessary for the good of the country, for the good of the firm.” Byrne concludes his letter by stating cryptically:

“Coming forward publicly about my involvement in other matters was hardly my first choice. But for three years I have watched my country pull itself apart while I knew many answers, and I set my red line at seeing civil violence breaking out. My Rabbi made me see that ‘coming forward’ meant telling the public (not just the government) the truth. I now plan on leaving things to the esteemed Department of Justice (which I have doubtless already angered enough by going public) and disappearing for some time.”

In a call from his car after delivering a farewell speech to his surprised employees, Byrne said he had his bags packed. “I will be sitting on a beach in South America shortly, and that is all I want to think about,” he says. “I want to focus on getting back into good shape, doing yoga and becoming a vegetarian.”

Welcome to Patrick Byrne’s bizarre world. The existential crisis Byrne is putting his Salt Lake City-based company through comes after an impressive career pioneering e-commerce. Nearly two decades ago, Byrne was lauded as “The Renaissance Man of E-Commerce.” The closeout store he took control of in 1999 for a mere $7 million was on its way to becoming an e-tailing phenom and eventually came to command a market capitalization of $2.2 billion. But in the hyper-competitive digital age, disruptive business models don’t last long, and today Overstock—once an innovator—is a has-been.

This isn’t any secret. By the time of his resignation, Byrne had all but given up trying to compete with the likes of Amazon and Wayfair, and he had spent the last two years unsuccessfully attempting to unload Overstock’s retail business. Just as e-commerce captivated Byrne at the turn of the millennium, blockchain was his shiny new obsession. So Byrne funneled Overstock’s dwindling resources into blockchain ventures—more than $200 million since 2014. About 30% of that sum went into 18 early-stage companies that are building a suite of blockchain technology products he wanted to sell to governments. The rest has been seemingly squandered on a personal vendetta: Overstock is creating a blockchain version of Nasdaq, which Byrne believed could right some the evils of Wall Street—particularly the naked short-selling that he claims plagued his company for much of the last 15 years. Byrne attracted an eclectic mix of allies to his corner doing what he calls “God’s work,” ranging from Akon and the World Bank to the infamous short-seller Marc Cohodes and the city of Denver.


Patrick Byrne at Overstock's headquarters

TIM PANNELL FOR FORBESBut the walls closed in on Byrne’s quixotic adventure. Overstock’s heavily shorted stock plummeted from $87 in the beginning of 2018 to about $20 today as some $1.5 billion in market capitalization has evaporated. Once reliably profitable, Overstock lost $206 million last year and $110 million in 2017. In recent months, Byrne fired some 400 people.

Even worse were the cracks forming in Overstock’s new strategy. The company’s prized crypto offering, Tzero, is the subject of an SEC investigation, and a highly-anticipated private equity investment into the exchange has withered away. Its blockchain investment arm, Medici Ventures, has yet to generate meaningful revenues and racked up losses of $61 million in 2018. With many big companies now embracing blockchain technology—including a bold new plan from Facebook—Byrne’s strategy shift to blockchain suddenly looks as challenging as Overstock’s online retailing business.

Eventually even Byrne’s most loyal shareholders—blockchain believers among them— were in open revolt. Fumed Byrne in May, after investors bombarded him with calls and emails when he sold 900,000 shares of stock, “Frankly, I had no idea that shareholders would demand explanations of why and how I might want to use my cash derived from my labor and my property to pursue my ends in life.”

Byrne is the son of the late John “Jack” Byrne, a University of Michigan-trained mathematician and renowned insurance executive credited with turning around Geico in the mid-1970s and persuading Warren Buffett to invest in the auto insurer. Geico would eventually become one of the biggest contributors to Berkshire Hathaway’s bottom line, and Buffett once described Byrne’s father as “the Babe Ruth of insurance.” When Byrne was in middle school, he gravitated toward his father’s friends. Bethesda neighbor Gordon Macklin, the president of Nasdaq from 1975 to 1987 (and later the chairman of San Francisco investment bank Hambrecht & Quist), would drive Patrick to school regularly. Buffett was an occasional house guest, and Byrne’s parents would allow him to skip school to spend time with the investment maven.

Says Byrne, “My mom would get a case of Pepsi, and Buffett, who is a teetotaler, always carried a hip flask of cherry syrup like a drunk. We’d sit there and over an afternoon polish off 18 Pepsis.”

Byrne’s father later went on to turn around American Express’s Fireman’s Fund and eventually created his own insurance holding company, called White Mountains Insurance. His stake, worth hundreds of millions at his retirement in 2007, formed the basis of the family’s wealth.

Patrick was the youngest and most precocious of Jack’s three sons. In 1981, he headed to Dartmouth to study philosophy and Asian studies. Shortly after his graduation, he was diagnosed with testicular cancer. After treatment, he celebrated with a cross-country bicycle ride with his two older brothers. The cancer would come back two more times in quick succession and keep him in the hospital for much of his 20s. To keep his mind occupied while he was bedridden, he began pursuing a graduate degree in mathematical logic from Stanford. In 1988 he headed to Cambridge University as a Marshall Scholar and eventually received his philosophy doctorate from Stanford. Byrne speaks Mandarin and several other languages and once translated Lao Tzu’s Tao Te Ching (The Way Of Virtue) into English. “I was one of those guys who actually studied philosophy because I was trying to figure out man’s place in the universe,” says Byrne, whose dissertation explored the virtues of limited government and drew from libertarian Robert Nozick’s Anarchy, State and Utopia.

Despite his years in academia, Byrne pivoted hard to the pursuit of wealth in the late 1980s. “I had grown up in a very business-oriented household … I never anticipated staying in a university setting,” he says. In 1987 he bought a bankrupt hotel with his older brother called the Inn at Jackson Hole for about a million dollars, which they sold several years later for $4 million. In 1989, they started buying distressed consumer debt at 5 cents on the dollar during the S&L crisis. In 1991, Byrne led a $1 million investment into the development of the Red Dolly Casino in Colorado, which was sold three years later for $5 million. He also invested in distressed strip malls, office space and apartment buildings across the country. His dad often loaned his sons money and in later years put up mezzanine capital, collecting a preferred, 15% return and half as much equity.

Nothing kept Byrne’s attention very long. In 1994, he led an investment into Centricut, a New Hampshire-based industrial torch-part manufacturer, and served briefly as CEO when the current management fell ill. In 1997, he left to run Berkshire Hathaway’s Fechheimer Brothers, which made uniforms for police, firemen and military. In 1999, seeing an opportunity to sell leftover inventory online, his investment holding company, High Plains Investments LLC, acquired a majority stake in D-2 Discounts Direct for $7 million. He renamed it Overstock, and when 55 venture capitalists declined to fund the company’s growth, he turned to friends, family and his own checkbook. His timing was perfect. The company began scooping up inventory from bankrupt dot-coms, whether it was consumer electronics, jewelry or sporting goods, then selling it on the cheap. In 2002, Overstock’s revenue hit $92 million and Byrne took the company public via a Dutch auction, which allows investors (not bankers) to set prices for the stock offering themselves. (Google went public the same way.)

By 2005, the company’s stock, which had skyrocketed post-IPO, began to slide as its losses widened. Byrne became convinced it was because of naked short-selling, an illegal practice in which investors sell shares in a company without actually borrowing the shares, typically using leverage. In a now-infamous August 2005 conference call, he ranted about how hedge funds, journalists and regulators were conspiring to push down the company’s stock price under the direction of some faceless menace he called the “Sith Lord.” Overstock sued short-selling hedge fund Rocker Partners and research firm Gradient Analytics, which had been critical of the company. Then, in 2007, he filed a $3.5 billion lawsuit against 11 of the biggest banks on Wall Street (Goldman Sachs, Morgan Stanley and Credit Suisse among them), accusing them of participating in a “massive, illegal stock market manipulation scheme” that distorted the company’s stock price by facilitating naked short-selling.

The crusade cost him two directors, plus the confidence of his father, who threatened to step down from the board because he believed his son was distracted from Overstock’s core business. The litigation dragged on for over a decade and resulted in a handful of settlements, including a $20 million payment from Merrill Lynch in 2016. “I think he won the battle but lost the war when it came to naked short-selling,” says Tom Forte, long the lone analyst still covering the stock. In the years Byrne spent chasing short-sellers, Overstock’s stock sagged and revenue drifted slowly upward, hitting $830 million in 2008, $1.3 billion in 2013 and $1.8 billion in 2018. And while the company never racked up massive losses like Amazon or Wayfair, as Byrne likes to point out, its profitability has been modest. Overstock broke into the black in 2009, then eked out small profits for the next seven out of eight years.


Maria Butina

THE ASSOCIATED PRESSIn 2017 and 2018, as Byrne shifted his attention to expanding in crypto and blockchain, the company began bleeding red ink—a whopping $316 million over two years, which is more than twice the profits Overstock has ever delivered. Byrne chalked his market share declines up to competitors with seemingly endless piles of cash to blow through. “The thing I never anticipated … was that I would be in an industry that tolerated people losing $500 million, $1 billion or $3 billion forever. We started drawing copycats who came in and seemed to have unlimited capital,” he says, not hiding his disdain for and jealousy of Wayfair.

However, former employees say Byrne was distracted by his short-selling crusade and failed to take competitors seriously. Internally Byrne’s ADD management style—enthusiastically starting up new projects but then losing interest—has been jokingly referred to as the Overstock “ovolution.” In 2004, the company spent a couple of million to develop an online auction platform akin to eBay, but it struggled to turn a profit and was shut down in 2011. (Byrne later said he wished he hadn’t abandoned it.) In 2014, Overstock invested $400,000 to facilitate pet adoptions by working with shelters, which it still runs but describes as a “public service.” The company started selling home, auto and small business insurance in 2014, too, which Byrne described as “a long-term play” before trashing it as not doing “particularly well” three months later.

“Patrick gets very focused on something, and then when he sees the financials didn’t work out, he basically forces layoffs,” says Chad Huff, a former software developer. “Initiatives would get started, then shelved. Or they’d be half done and not in a great state but rolled out anyway.”

Acouple of months before his resignation, as sheets of rain blanket Overstock’s new headquarters at the base of Utah’s Wasatch Mountains—a building designed to resemble a peace sign when viewed from above—Byrne has finished sitting through a scheduled business luncheon and gone missing. Several minutes later, after his assistant tracks him down, he glides into his office, where posters of Bob Marley and Pulp Fiction give it a dorm-room feel. He sits down and begins ruminating on his two decades running Overstock. “It’s kind of imagination land,” says Byrne, dressed in a black long-sleeve T-shirt, jeans and tennis shoes.

Strangely, Byrne’s Overstock was long immune from activist shareholder campaigns and boardroom coups and what ultimately prompted his sudden departure is still murky. Investors like Marc Cohodes had called for Byrne to step aside as CEO and move into a chairman position. Despite recent stock sales, Byrne remains the company’s largest shareholder, with a 14% stake and says he wasn’t pushed out. “This is not about pressure from shareholders. The only pressure—or actual issue— was that the insurance companies were having conniptions,” he says.

Byrne began chasing crypto in late 2013 when he asked dozens of staffers to work over the holiday break to fast-track a bitcoin payment feature. The price of bitcoin had skyrocketed that year from about $13 to more than $1,000, and in January 2014, Overstock became the first major retailer to accept bitcoin as payment.

Before long, Byrne began tapping Overstock’s balance sheet to fund bigger and bigger blockchain initiatives. The crown jewel: a digital stock exchange called Tzero, which is seeking to allow investors to trade so-called security tokens that represent traditional securities, like stocks, bonds, real estate, private equity and art on the blockchain. Proponents say this will improve access and liquidity for certain investments, plus cut down settlement times for stocks and bonds from up to two days to mere seconds. A bonus: The system would make naked short-selling impossible because there is no longer a lag time between a buy and sell order.

On the plus side, Tzero has satisfied a set of fearsome regulatory requirements, most notably acquiring a company licensed as an alternative trading system. The problem is, with just two tokens—representing Overstock’s and Tzero’s own shares—available to trade on Tzero’s platform, almost no one uses it. The company says it is aiming for 5 to 10 tokens by the end of the year. In May, it announced partnerships with Saudi real estate giant Emaar Properties, to list $2 billion in real estate, and Securitize, a startup that packages regular assets into digital tokens that can be traded on the blockchain. While it hopes to generate revenues from listing fees, trading commissions, interest on lending assets and more, it first needs to create liquidity by attracting quality issuers and investors to its platform.

Byrne was also developing a securities lending platform as part of Tzero, which would connect asset-rich institutional investors like pension funds (who make money by lending their stock) directly with short-sellers (who borrow stock to make trades). Both parties stand to benefit from lower fees, plus will receive a blockchain-enabled digital locate receipt that proves the shares have actually changed hands. The service takes dead aim at banks like Goldman Sachs and Morgan Stanley, which currently sit in the middle of these transactions. It’s been tried before: A company called Quadriserv created a similar stock lending platform named AQS in 2006, but alleged in a recent lawsuit that banks conspired to “boycott AQS and starve it of liquidity.” In 2016, AQS was sold in a fire sale for $4 million.

“It’s the last great business on Wall Street,” says Byrne. “Pension funds are going to understand they have been deprived of tens of billions of earnings a year. That money is turning into Maybachs in the Hamptons.”

At the company’s annual shareholder meeting in May, Byrne fielded tough questions from investors. While the price of bitcoin had climbed some 60% in the last five months, Overstock’s shares continued to slide. And after months of delays, Overstock just dropped a bombshell: Tzero would receive a measly $5 million in the form of Chinese renminbi, U.S. dollars and other Hong Kong-traded securities from Asian investment firm GSR Capital, after the company originally touted a deal size of as much as $404 million.

Over time Byrne developed a dilettante’s reputation for overpromising and underdelivering. In 2016 Byrne boldly told investors that Overstock would be issuing the world’s first equity security using the blockchain. “The history of capital markets is entering a new era,” he said. Byrne personally ended up buying 50% of the $2 million preferred stock offering.

In 2017, Byrne announced a joint venture with Peruvian economist Hernando de Soto Polar that would “challenge global poverty and inequality” by creating a blockchain-based global land registry. But when the two couldn’t agree on terms, Byrne ended up contributing $7 million of his personal capital to take a 43% stake in the newly formed Medici Land Governance.

Overstock began exploring a sale of its retailing business in 2017, but to date no buyers have materialized. There was also Tzero’s troubled “initial coin offering,” which set out to raise $250 million but, ultimately as crypto prices were dropping, generated $105 million in August 2018 at an expense of $21.5 million to corporate parent Overstock. The offering is now being investigated by the SEC as part of a broader ICO crackdown.

Many investors grew tired of Byrne’s promises. “Basically, every initiative they put forward, they promised or signaled to the market that this is an incredible layup and they will get it done in three to six months,” says Kevin Mak, a lecturer at Stanford Business School who invested in the company in 2017 and sold his shares last fall. “I ultimately exited when I found that the information I was getting from management was no longer—I want to pick the right words—reliable.”

In the end, Byrne was forced to spend a considerable amount of time hunting for fresh funds to keep his dream alive. In November 2017, Overstock borrowed $40 million from his mother and brother at an interest rate of 8%. Over the next few months, during the height of crypto-mania, the company received $150 million from two investors, including George Soros, after they exercised warrants in exchange for stock (the investors have since dumped their shares). In August and September 2018, the company raised another $95 million by issuing new shares of common stock in an “at the market” offering.

The problem is, unlike most companies that buy back shares as prices decline, Overstock is selling, diluting the company’s equity. Shares outstanding have climbed to 35 million from 25 million in the last two years. In the first quarter of 2019 Overstock committed to another quick stock sale, raising $31 million to partially offset a $51 million cash burn.

Meanwhile, Overstock’s original business is running on fumes. “It was kind of a fight to run retail because it was never his priority,” says Stormy Simon, former president of the operation who left in 2016. Since then, there have been several rounds of layoffs in the retail business, leaving a raft of empty desks in Overstock’s new $100 million headquarters. And yet, to his blockchain staffers, Byrne was like Daddy Warbucks. Tzero CEO Saum Noursalehi was paid $4.8 million last year, while his brother and Tzero vice president Nariman earned $1 million. Tzero chief technology officer Amit Goyal made $1.8 million—and his brother Sumit earned an additional $765,000.

In Overstock’s recent quarterly filings, it indicates that it should be able to fund its current obligations for another 12 months, but after that, additional capital may be needed “to be able to fully pursue some or all of our strategies.” The ominous disclosure seems to have had little effect on Overstock’s languishing shares, because by now many investors have given up on the company.

Byrne never showed much respect for Wall Street or small-minded shareholders—and maybe that’s what got him in the end. “We’re like a Russian icebreaker trolling across the Arctic icefield. It’s three or four yards at a time and enormously expensive,” says Byrne. “When you’re talking about the kinds of numbers we’re talking about and freeing up trillions of capital … I think there is going to be so much money in it it’s kind of silly to try and model it.”

Photograph by Tim Pannell for Forbes

Get Forbes’ daily top headlines straight to your inbox for news on the world’s most important entrepreneurs and superstars, expert career advice, and success secrets.



Lauren Debter

I am a staff writer at Forbes covering retail. I’m particularly interested in entrepreneurs who are finding success in a tough and changing landscape. I have been at Fo

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To: Glenn Petersen who wrote (121922)8/23/2019 5:01:36 PM
From: StockDung
   of 121951
 
Former Overstock CEO Alleges Deep State Blackmail Conspiracy Following ResignationPatrick Byrne resigned from Overstock and went on a strange media blitz on Thursday.


Published 6 hours ago on Aug 23, 2019 By Shane Trejo


A disheveled and erratic Patrick Byrne appeared for interviews on several media outlets Thursday shortly after he resigned as CEO of Overstock.com, the online retailer he founded over two decades ago.

Byrne alleges that he was embroiled in a deep state conspiracy, becoming romantically involved with Russian gun rights activist Maria Butina, and was set up as a federal informant to fuel the collusion conspiracy meant to harm President Donald Trump.

“I was given some fishy orders and I carried them out in 2015-2016, thinking I was conducting law enforcement,” Byrne said while appearing on Fox News’ “The Story.”

He alleges that the FBI was involved in a conspiracy to set up Trump, Hillary Clinton, Sen. Marco Rubio and Sen. Ted Cruz likely for the purposes of political blackmail.

“I’m highly confident that Bill Barr, the Department of Justice, will be providing those names on an indictment someday in the not too distant,”Byrne said.

He claims that the infamous Peter Strzok gave the orders for him to be embroiled in this dark conspiracy.

“I didn’t know who sent the orders, but I did them. Last summer, watching television and some congressional hearings, I figured out where these orders came from. They came from a guy named Peter Strzok.” Byrne said.

Strzok is the former FBI official who was fired after his texts were revealed with FBI lawyer Lisa Page, who was also his lover, showing his disdain and contempt for Trump and willingness to use his power to subvert his presidency.

“It was so strange that I was thinking, it’s almost like they’re letting this can-o-scandal develop and someday they’re going to shake it up and crack it and spray it all over the Republican Party,” Byrne said during another interview on CNN.

Byrne also claims former FBI Director James Comey was involved in this conspiracy.

“I was specifically told, this request is coming from Jim Comey at the request of somebody, who I’m not going to name. Do not assume it is the president. Do not assume it was President Obama. Do not assume that,” he said.

Now that he has spilled the beans about his involvement with the deep state, Byrne plans to retreat back into the shadows. He has worked with federal investigators to make sure they are aware of his explosive allegations.

“I now plan on leaving things to the esteemed Department of Justice (which I have doubtless already angered enough by going public) and disappearing for some time,” he said.

Byrne has created more questions than answers with his peculiar media blitz yesterday, but if he is telling the truth, it appears the rabbit hole goes deeper than anyone could have imagined regarding the extent of corruption coming from the deep state.

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To: Glenn Petersen who wrote (121922)8/24/2019 9:01:53 AM
From: StockDung
   of 121951
 
""I see three options here. One, he is telling the truth," Gutfeld said on " The Five." "Two, he's telling the truth but... he's nuts. Three, he's lying to create some kind of cloud of conspiracy to deflect from the S.E.C. [Securities and Exchange Commission] investigation.""
=====================================================

Greg Gutfeld reacts to Patrick Byrne's claims: 'I see three options here'

By Victor Garcia | Fox News

Video

Overstock CEO resigns over Russia probe claimsPatrick Byrne claims he was an intelligence assets and made explosive allegations that he was ordered to have an affair with a Russian spy.

Fox News' Greg Gutfeld reacted Friday to former Overstock CEO Patrick Byrne's bombshell claims that he received "fishy orders" from now-fired FBI official Peter Strzok and took part in "political espionage" in the months before the 2016 presidential election.

"I see three options here. One, he is telling the truth," Gutfeld said on " The Five." "Two, he's telling the truth but... he's nuts. Three, he's lying to create some kind of cloud of conspiracy to deflect from the S.E.C. [Securities and Exchange Commission] investigation."

OVERSTOCK CEO PATRICK BYRNE RESIGNS AMID RUSSIAN SPY LINK, 'DEEP STATE' COMMENTS

Byrne, who resigned from Overstock Thursday, said on "The Story with Martha MacCallum" that had he helped the federal government with investigations twice in the past before FBI officials reached out to him again in 2016.

"I was given some fishy orders and I carried them out in 2015-2016, thinking I was conducting law enforcement," he told McCallum.

Video

Byrne said he later "figured out" the orders came from former FBI official Peter Strzrok.

Gutfeld hoped that those close to Byrne would help confirm in the coming days whether or not his claims are true.,

"I think the only way to know is if other people who know him say something in the next couple of days, like, 'he has issues' or 'no, this is totally legitimate. He's talked to me about it,'" Gutfeld said.

CLICK HERE TO GET THE FOX NEWS APP

"But if they say 'look, he has been known to spin tales' or all these people that he's mentioned, especially like Warren Buffett ... Warren Buffett should say 'hey look, he talked to me about this. What he's saying is it is totally legit.' Then I'd be more, I'd be on firmer ground."

Fox News' Charles Creitz contributed to this report.

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To: StockDung who wrote (121925)8/24/2019 12:39:38 PM
From: StockDung
   of 121951
 
Amazing how the media treats Patrick Byrne like a sane person.

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From: Glenn Petersen8/27/2019 10:07:04 AM
   of 121951
 
Short Selling Reduces Crashes

by Alex Tabarrok
Marginal Revolution
August 27, 2019 at 7:25 am



Short sellers are often scapegoated for market crashes but a rational market requires rational buyers and sellers. When the markets are dominated by irrational exuberance only the short sellers are speaking sanity. Short-sellers, therefore, should make prices more informative and reduce the Wile E. Coyote moment when it suddenly dawns on the irrational that gravity exists.

Deng, Gao and Kim test the theory and find it holds up; lifting restrictions on short sales reduces prices crashes.
We examine the relation between short-sale constraints and stock price crash risk. To establish causality, we take advantage of a regulatory change from the Securities and Exchange Commission (SEC)’s Regulation SHO pilot program, which temporarily lifted short-sale constraints for randomly designated stocks. Using Regulation SHO as a natural experiment setting in which to apply a difference-in-differences research design, we find that the lifting of short-sale constraints leads to a significant decrease in stock price crash risk. We further investigate the possible underlying mechanisms through which short-sale constraints affect stock price crash risk. We provide evidence suggesting that lifting of short-sale constraints reduces crash risk by constraining managerial bad news hoarding and improving corporate investment efficiency. The results of our study shed new light on the cause of stock price crash risk as well as the roles that short sellers play in monitoring managerial disclosure strategies and real investment decisions.
Hat tip: Paul Kedrosky.

marginalrevolution.com

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To: Glenn Petersen who wrote (121927)8/27/2019 10:37:21 AM
From: kidl
   of 121951
 
Would be interesting to see the actual data used for this “study”. Did they consider the effects of naked short selling , failures to deliver etc?

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To: kidl who wrote (121928)8/28/2019 4:22:10 PM
From: Glenn Petersen
   of 121951
 
$55 buys you the answer. If I were conducting the study, I would include naked short sales.

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To: scion who wrote (121921)9/10/2019 3:55:45 PM
From: StockDung
   of 121951
 
From 2009 to 2011, YMER SHAHINI, along with co-defendants Jason Galanis, John Galanis, Derek Galanis, Gary Hirst, and Gavin Hamels, engaged in a scheme to defraud the shareholders of a publicly traded company called Gerova Financial Group, Ltd. (“Gerova”), and the investing public, by obtaining secret control over millions of shares of Gerova stock and then manipulating the market for the stock as the defendants caused their secretly held shares to be sold. As part of the scheme, the defendants fraudulently generated demand for Gerova stock by bribing investment advisers to purchase for client accounts the Gerova stock that was sold by the defendants, thereby enabling the defendants to cash out from the scheme and make millions in illegal profits.
===================================

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE

Tuesday, September 10, 2019

Ymer Shahini Pleads Guilty To Securities Fraud Conspiracy In Connection With Scheme To Defraud Investors And Shareholders

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that YMER SHAHINI pled guilty today before United States District Judge P. Kevin Castel in connection with his role in a scheme to defraud shareholders of a publicly traded company and the investing public.

U.S. Attorney Geoffrey S. Berman said: “Ymer Shahini has now admitted to his vital role in a multimillion-dollar fraud. He knowingly served as a straw man to conceal beneficial ownership of stock, which facilitated a fraudulent scheme that reaped tens of millions in illegal profits.”

According to the allegations contained in the Indictment:

From 2009 to 2011, YMER SHAHINI, along with co-defendants Jason Galanis, John Galanis, Derek Galanis, Gary Hirst, and Gavin Hamels, engaged in a scheme to defraud the shareholders of a publicly traded company called Gerova Financial Group, Ltd. (“Gerova”), and the investing public, by obtaining secret control over millions of shares of Gerova stock and then manipulating the market for the stock as the defendants caused their secretly held shares to be sold. As part of the scheme, the defendants fraudulently generated demand for Gerova stock by bribing investment advisers to purchase for client accounts the Gerova stock that was sold by the defendants, thereby enabling the defendants to cash out from the scheme and make millions in illegal profits.

As a part of the scheme to defraud, Jason Galanis obtained such control over Gerova so as to be able to cause Gerova to enter into transactions of his design, and for his benefit, including the issuance of Gerova stock. Jason Galanis obtained this control without identifying himself as an officer or director of Gerova to avoid the SEC-imposed bar that prohibited him from holding such positions at publicly traded companies. Among other means and methods, Jason Galanis, with the assistance of Gary Hirst, caused more than five million shares of Gerova stock, which represented nearly half the company’s public float and which was intended for Jason Galanis’s ultimate benefit, to be issued to and held in the name of YMER SHAHINI, who knowingly served as a foreign nominee for Jason Galanis. SHAHINI, Jason Galanis, John Galanis, Derek Galanis, and Hirst understood that the purpose of the stock grant to SHAHINI was to disguise Jason Galanis’s ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock.

At the same time, and as a further part of the scheme to defraud, John Galanis and Derek Galanis, among others, with the knowledge and approval of YMER SHAHINI and Jason Galanis, opened and managed brokerage accounts in the name of SHAHINI (the “SHAHINI Accounts”), effected the sale of Gerova stock from the SHAHINI Accounts, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public Jason Galanis’s ownership of and control over the Gerova stock.

Jason Galanis also fraudulently induced investment advisers, including Gavin Hamels and others, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser. By causing the purchase of Gerova stock at the time, quantity, and/or price of their choosing, Jason Galanis was able to, among other things, effectuate the sale of large quantities of Gerova stock from the SHAHINI Accounts that Jason Galanis controlled while artificially maintaining the price of Gerova stock through coordinated match trading. Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public. As a result, Jason Galanis and his co-conspirators reaped nearly $20 million in profits.

* * *

SHAHINI, 49, a citizen of Kosovo, was the first defendant extradited to the United States pursuant to the extradition treaty between the United States and the Republic of Kosovo, which went into effect on June 13, 2019. SHAHINI pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison. SHAHINI will be sentenced by Judge Castel on December 12, 2019, at 2:15 p.m.

The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Berman praised the work of the United States Postal Inspection Service and the Federal Bureau of Investigation, and thanked the U.S. Securities and Exchange Commission for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian Blais, Rebecca Mermelstein, and Elizabeth Espinosa are in charge of the prosecution.

Topic(s):

Securities, Commodities, & Investment Fraud

Component(s):

USAO - New York, Southern

Press Release Number:

19-287

Updated September 10, 2019

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