Overstock, the bitcoin-friendly retail company and the parent of security token marketplace tZERO, was subpoenaed twice by the Securities and Exchange Commission (SEC) at the end of last year.
On Dec. 9, the e-commerce giant was hit by one subpoena requesting “documents related to the GSR transaction and the alternative trading system run by tZERO ATS, LLC,” the filing said. The transaction in question appears likely to be a $5 million investment in tZero from Chinese private equity firm GSR.
The troublesome deal, initially planned in 2018 as a $400 million purchase of tZERO tokens by GSR, kept shrinking as the buyer renegotiated it throughout 2019, finally closing last March as a far more modest $5 million in equity. Makara Capital, another company initially planning to invest along with GSR, backed off the deal, as Overstock reported in August.
Even the agreed upon $5 million may not have been paid in full yet. The filing indicates that by Dec. 31 GSR had provided only $4.4 million, with the rest to be paid by March 31, 2020.
The final SEC subpoena, filed Dec. 19, was related to Overstock’s “insider trading policies as well as certain employment and consulting agreements,” the filing says. The regulator has also been requesting Overstock's communications with the company’s founder and former CEO, Patrick Byrne, who quit his position and left the company in August.
Overstock is also still under investigation by the SEC regarding the 2018 sale of tZERO tokens. “We are cooperating with the SEC's investigation and have provided documents requested in the subpoenas,” Overstock said in the latest filing.
tZERO CEO Saum Noursalehi did not respond CoinDesk's request for comment by press time.
The end of the year didn't bring good news for Overstock in terms of its finances either. According to the annual report, earnings for its retail business fell over 20 percent compared to 2018. For the year ending Dec. 31, net annual revenue had dropped from $1.82 billion to $1.46 billion. Overstock’s online store has been the source of funding for all the blockchain subsidiaries of Overstock, including tZERO.
Plans to launch a digital stock marketplace together with the Boston Stock Exchange have also been pushed back. The SEC extended the review period for a proposed rule change for the second time on Jan. 16, the report says. The Boston Stock Exchange submitted an amended filing on March 9.
In September, an investor launched a class action lawsuit against Overstock, Byrne and the firm's former chief financial officer, Gregory Iverson, over how the dividend payout was structured and how Byrne had sold his own shares of Overstock when departing.
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