Photographer: Cayce Clifford/Bloomberg
Overstock's Byrne Says SEC Wants to `Know Everything' About ICOBy
Regulator asked about investor accreditation, company history
Retailer has had many meetings with SEC and Finra, CEO says
Overstock.com Inc. Chief Executive Officer Patrick Byrne has a colorful history when it comes to dealing with Wall Street and regulators. It could get even more interesting.
The Securities and Exchange Commission wants to know everything there is to know about the company’s digital-token offering, Byrne said in an interview Thursday. That includes “very broad questions” about the history of the company and its blockchain subsidiary tZero, as well as more specific inquiries into how Overstock knows its token investors are accredited, he said.
“They want to know everything about what we’re doing in the world of ICOs and they want to have a conversation," said Byrne. “We’re super compliant. We welcome this.”
Overstock disclosed in a filing Thursday that the SEC asked the company in February to voluntarily provide information related to its plan to offer tZero tokens, digital coins that owners may be able to buy and sell on Overstock’s trading platform. The online retailer did not receive a subpoena, Byrne said.
The disclosure Thursday came as the SEC expanded its crackdown on initial coin offerings by issuing a number of subpoenas to firms and individuals behind specific offerings that the agency believes might be breaking the law, a person with direct knowledge of the matter told Bloomberg.
“It’s way past due the SEC comes in and looks at this,” Byrne said.
Overstock has had numerous meetings with the SEC and the Financial Industry Regulatory Authority, he said. Byrne is currently out of the country, but said he plans to schedule another meeting with the SEC when he returns to the U.S.
Byrne has been feuding with Wall Street and its regulators for almost as long as he’s been running Overstock. In 2005, he claimed his stock was the victim of a conspiracy by short-sellers, led by a mysterious figure he dubbed the Sith Lord on an earnings call. His main complaint has been naked shorting -- selling shares that haven’t been borrowed. He blames the illegal practice for much of Wall Street’s ills, a view that’s not shared by many regulators or analysts. And he says tZero’s blockchain technology will stop naked shorting and keep everyone honest.
As part of the SEC’s latest crackdown on ICOs, it’s reportedly focusing in part on “simple agreements for future tokens,” or SAFTs, which are investment contracts issued by some startups that are conducting ICOs. The agreements essentially promise buyers future access to tokens that don’t exist yet.
Overstock said in October that it would sell SAFTs to accredited investors who would later get tZero tokens if they are ever issued. The tokens could then be bought and sold as securities on the Overstock’s SEC-compliant trading platform.
The company has entered into agreements with around 1,100 buyers for about $115 million of tokens, it said Thursday. Instead of SAFTs, it now calls the contracts SAFEs, or simple agreements for future equity. Byrne declined to offer details about the wording change. Overstock is seeking to raise up to $250 million in the offering, and doesn’t guarantee that it will ever issue the tokens.
If it does end up issuing them, it’s not required to register with the SEC due to an exemption in the Securities Act, Overstock said.
Shares of the Salt Lake City-based retailer fell as much as 10 percent, before closing 4.4 percent lower at $57.75. The stock surged 23 percent on Sept. 27 after the firm first announced plans for a token exchange.
— With assistance by Joshua Fineman, Zeke Faux, and Camila Russo