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US Judge U-Turns on Ruling in Overstock Digital Dividend Lawsuit

The plaintiff may now file an amended complaint against Overstock and former CEO Patrick Byrne.

Jan 8, 2021 at 9:33 a.m. UTC
Updated Sep 14, 2021 at 10:53 a.m. UTC

A senior district judge in the U.S. state of Utah has acknowledged he made a "mistake" when granting Overstock's motion to dismiss a lawsuit over its digital dividend issued in 2019.

  • In late September 2020, Overstock, the bitcoin-friendly e-commerce firm, was granted the motion to dismiss the case brought by the Mangrove Partners Master Fund.
  • In the latest filing on Jan. 6, Judge Dale Kimball said he had "overlooked" a footnote from the plaintiff requesting permission to file an amended complaint if the motion was granted.
  • The case hinges around the digital dividend that Overstock paid to investors, with Mangrove alleging it was deliberately designed to create an artificial squeeze on short sellers.
  • The plaintiff also claimed Overstock had made false declarations about its financial future.
  • The shareholder dividend took the form of a digital security listed on Overstock affiliate tZero’s trading platform.
  • Patrick Byrne, Overstock’s CEO at the time and a defendant in the lawsuit, was famously anti-short sellers and reportedly first became interested in blockchain as a way to limit their actions.
  • With Judge Kimball now acknowledging his error in granting Overstock's motion, he nullified the original ruling and granted Mangrove permission to file an amended complaint.

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