SEC’s Probe over Overstock’s venture, tZero seems to “almost dormant” alleges company’s interim CEO.
Jonathan Johnson, who took over Patrick Byrne just two weeks after his controversial exit, revealed details about SEC’s probe. In an interview with Fox Business, he mentioned that SEC’s enforcement division has not asked the company for any information since December 2018.
Further, the company is yet to receive any Wells notice from the SEC enforcement staff. A Wells notice is a document the SEC sends to people or firms when it is planning probable legal action for violating federal security laws.
“We haven’t had requests for information for almost a year. We have spent a king’s ransom to process their requests for information to put this to bed.”
Patrick’s Byrne’s Controversial Exit
Johnson further spoke about Patrick Byrne’s surprise exit from the company he founded.
Over the past 10 years, Byrne did a myriad of efforts to bring in regulatory and legislative remedies to curtail short-seller abuses. He was often a part of business news shows and even met with sympathetic congressional leaders to bring forth a resolution. Unfortunately, the SEC continues to view short selling as a necessary tool to curtail hyping of stocks.
Drop-in Revenue and Shares
tZERO, became the focus of an SEC probe in February 2018, While Byrne touted tZERO to bring a blockchain revolution. The results were quite the opposite, however. Since Byrne’s resignation, shares of the company have declined more than 22%. Further, Overstock’s revenue continued to shrink and the company reported a loss of $0.69 per share last quarter.
Johnson said that two investors had either reduced their planned stake or declined to put money into the project after initially signaling greater interest. He further said that SEC’s investigation is more focused on the comments made by Overstock officials. The comments must have attracted the investors, thus, creating hype and influencing the latter to stake funds in tZero. Further, two investors had reduced their planned stake after showing great interest earlier.
Jonathan Says ” Enforcement Staff has Zero Incentive to close a Case”
Yet another problem faced by the company is dealing with regulators while Overstock engages with SEC compliance staff over the creation of tZERO, the company is also undergoing a routine review of its plans for a crypto stock market.
“The two sets of dialogue got conflated into one. We have been dealing with the SEC for 17 years and the enforcement staff has zero incentive to close a case unless you cooperate and push and that’s what I did”
Johnson met with SEC’s officials in June to end the investigation and get an understanding of its scope. He is yet to hear back from the agency.