Online retailer Overstock is facing a lawsuit from shareholder John Murphy over former CEO Patrick Byrne’s abrupt departure from the company and off-loading of $90 million worth of shares.
According to Law360 on March 11, Murphy is seeking records under Section 220 of Delaware General Corporation Law to examine potential violations of duty on the part of Overstock’s directors in connection with Byrne’s actions. The suit states:
“This action seeks corporate books and records to investigate Byrne’s and the board’s role in what appears to be a scheme to cause a so-called ‘short squeeze,’ resulting in Byrne’s sudden resignation from the company and sale of over $90 million of his stock.”
Patrick Byrne resigns, sells 5 million OSTK shares, flees to Indonesia
In August 2019, Patrick Byrne suddenly resigned from his role as the e-commerce company’s CEO. The departure came 10 days after Byrne made obscure comments regarding his role in assisting the “deep state.” In a statement published to Overstock’s website, Byrne said:
“Starting in 2015 I (operating under the belief that I was helping legitimate law enforcement efforts) assisted in what are now known as the ‘Clinton Investigation’ and the ‘Russian Investigation’ (in fact, I am the notorious ‘missing Chapter 1’ of the Russian investigation).“
On Sep 18, 2019, Byrne published a filing revealing that he had sold his entire stake in Overstock — 5 million shares worth approximately $90 million, equating to 13% of all OSTK stock.
Shortly after, Byrne blogged that he was in Indonesia, emphasizing that jurisdiction comprises “a state without an extradition treaty with the United States.”
Byrne also indicated that he would be shoveling the money earned through selling his stock into “investments that are counter-cyclical to the economy: Gold, silver, and two flavors of crypto.”
Overstock directors accused of assisting Byrne
The action accuses Byrne of having “engaged in a series of improper and potentially illegal actions while in the process cashing out over $90 million dollars in stock and fleeing the country.”
Further, the suit suggests that Overstock’s board may have assisted Byrne in allowing the sudden exit and subsequent stock dump to happen.
Murphy also contends that Byrne’s “evident psychological instability” harmed Overstock’s reputation, and damaged the company’s share value.
“His misconduct not only triggered an investigation by, among others, the U.S. Securities and Exchange Commission, it contributed to the destruction of hundreds of millions of dollars of the company’s value,” the suit states.
The action also seeks documents pertaining to Overstock’s security token exchange, Tzero.