Originally posted on 9/16/2019 by Patrick Byrne
News from the grassroots of Wall Street has been reaching me. An old friend from Staten Island, who seems to be wired into most scuttlebutt on Wall Street, tells me that a broker or two is telling OSTK shorts that they need not worry about the upcoming dividend because the SEC is going to step in and save their bacon. Every component of what Overstock is doing has already passed the SEC sniff test (I worked at Overstock once, have left the firm and have no relationship with it now, but those are the hoops through which I carefully jumped these last couple of years).
Overstock has over its lifetime issued ≈ 37 million shares of OSTK, it is generating ≈ 3.7 million blockchain-based tokens to trade on tZERO, and issuing them on a 1 for 10 basis. That arithmetic works for most of us. I am pretty sure I could teach my dog to follow it. But some on Wall Street object that this is manipulative. Really, they do. That’s what they say.
So this is going to give us a chance to find out whether Wall Street players are still above the law if they “have juice” (as was once said within the SEC about Morgan Stanley CEO John Mack, when an investigator named Gary Aguirre was told to lay off him, because in the pre-2008 days the SEC was captured by powerful Wall Street interests).
The truth is, of course, it disturbs them because the settlement system is as sloppy as I say. Look up the Dole case (“Dole Case Illustrates Problems in Shareholder System” New York Times March 2017 ) or read around on this site and it will all become clear. No one knows really who owns how much, a blockchain-based dividend reveals and drives out the slop, and the oligarchy (which derives much wealth in many different ways from the fact of that slop) wants it neither revealed nor fixed. They cannot say that, so I am sure they will try to rationalize it in a dozen different ways.
The SEC exists to protect investors. No retail investor would lose a penny from that dividend going forward. The only market participants in harm’s way would be the shorts, but shorts are sophisticated investors. They were notified in July via an an 8K that this was happening. They took the risk. If the SEC responds to the lobbying they are getting from their client industry (Wall Street), if the SEC steps in and disrupts this fair and appropriate dividend from OSTK, it will be the single greatest piece of proof one could imagine that they are still in the pocket of the oligarchy. And I, who have tried these last few years to help them rebuild their reputation with the public, will be … unhappy. Actually, I will consider it the proverbial “act of war” ending a long and productive peace we have maintained.
It reminds me in some odd way of the truth about the death of James Foley (not the cover story). I thought that was one of the wackiest stories I knew, and I have felt guilty keeping the truth secret as I have, but even that angst would be topped by this one, were the SEC to interfere so openly with the proper functioning of the market in order to advantage concentrated interests by imposing a dispersed cost on the retail investing public.
If the SEC were to do such a thing as interfere with the dividend OSTK announced, might that be retaliation for my having come forward to the authorities in April, and to the public in the last week of August? Why would they feel the need to retaliate? Could there be any connection…?
What is the right thing to do? It has been weighing on my conscience a lot of late: you know, even in my recent and now publicly-disclosed whistle-blowing, I never breathed a word of Foley to anyone. Not even the current, legitimate feds. Kind of a matter of honor thing. But now I am not sure if withholding the truth from his family and the authorities is correct of me. Let me know your thoughts in the comment section.