- The case against Overstock executives is back on after the judge reversed his September dismissal
- Founder Gabriel Bryne and another high ranking board member were accused of manipulating the share price in 2019
- The plaintiffs can now file an amended complaint after the judge admitted to a mistake
The class action lawsuit against Overstock executives and their controversial digital dividend is back on after the judge that initially dismissed the case reversed his decision after an appeal. Two leading Overstock executives, including founder Gabriel Byrne, are on the hook for millions of dollars after a group of investors took umbrage at the digital dividend the company offered in 2019 which they considered to be an unlicensed security and led to them experiencing losses on their short calls.
Overstock Execs Accused of Short Seller “Revenge”
Byrne and former CFO Gregory Iverson have been in conflict with a group of Overstock investors and short sellers over a controversial digital dividend tied to the company’s tZero project. The investors filed a class action lawsuit in September 2019, arguing that the digital dividend was a way to exact “revenge upon short sellers” and artificially boost the share price.
Byrne conceived the idea of a digital dividend in early 2019 as a way to boost the usage of the new tZero platform, with the tokens, OSKTO, only being tradeable on the platform after a six-month vesting period. This, the lawsuit said, merely served to punish short sellers (those who had wagered on the share price going down) and allowed Byrne to sell his shares at a premium prior to him leaving the company in August 2019.
Judge Kimble Admits Mistake
The judge in the case, Dale Kimble, dismissed the case last September at the defendants’ request after ruling that the token sale did not amount to the sale of an unregistered security. This dismissal was appealed and on Wednesday judge Kimble reversed his own dismissal, admitting that he had missed a vital footnote in the prosecution case which included crucial new evidence regarding insider knowledge of Overstock’s financial position.
The case has now been reopened and will continue throughout 2021, with the prosecution now given leave to file an amended complaint. Byrne left Overstock in sensational circumstances when he admitted being involved in a “political espionage” sting attempt following a relationship with a now-jailed Russian spy.