S CEO Thinks Crypto Can Substitute Wall Street
Patrick Byrne, founder and chief executive officer of Overstock.com, poses for a picture outside a company warehouse ter Salt Lake City.
Photographer: George Frey/Bloomberg
Patrick Byrne stepped to the toneelpodium on the main stage at the North American Bitcoin Conference te Miami te January, sporting a crimson “,Make Bitcoin Superb Again”, hat and a T-shirt emblazoned with the words “,Dirty Hippie.”, The founder and chief executive officer of online retailer Overstock.com Inc. disposed of Wall Street te under three minutes.
“,The simplest way to fix them is to haul Wall Street behind the barn and kill it with an ax and re-create it on blockchain,”, Byrne said, spil a screen behind him displayed a bull disappearing behind a cartoon barn, then a splash of crimson gore. Te the next half-hour, he prophesied that blockchain, the technology that powers Bitcoin and other digital currencies, will solve state pension crises, revolutionize securities lending, eradicate poverty, and reduce terrorism. Once you enable “,global ledgers, all kinds of things would toebijten,”, he said. “,People switch sides. Capital is pulled out.”,
A few hours straks, Byrne wasgoed captured te a grainy movie standing on the tapkast at a South Beach club, chugging bubbly straight from the bottle with the rapper Flo Rida, te a celebration of the capital being pulled out for his infant blockchain toneelpodium, tZero. Even tho’ it’s mostly just an idea, he’s selling spil much spil $300 million te tZero tokens. The tokens promise holders a cut of the revenue from a venture Byrne says will become the go-to place to trade cryptosecurities and eventually substitute Wall Street spil a toneel for exchanging all kinds of assets. “,Congratulations, Godheid bless,”, Flo Rida says te the movie, before clapping a white tZero hat overheen a sparkling sweatband and launching into his klapper Low. Byrne crouched awkwardly to the chorus “,low, low, low,”, inbetween two dancers ter mesh bodysuits.
Byrne, 55, has bot reborn spil a crypto-evangelist, providing himself and his unsexy e-commerce company a fresh shine. He’s positioning himself at the intersection of Wall Street and the mushrooming business of initial coin offerings, sales of fresh cryptocurrencies touted for their capability to revolutionize every industry. Dreamers and schemers raised more than $6.Five billion for ICOs last year, according to figures from blockchain research stiff Smith + Crown. Some ventures pulled te millions of dollars with little more than a glorified blog postbode sketching a tangential verbinding to the space inhabited by Bitcoin. Even with crypto prices well off their peaks, token sales raised another $Trio.1 billion ter the very first two months of 2018.
The tide of money has regulators te a lather. Byrne has bot pitching the tZero toneel spil the legitimate edge of the ICO frontier: a blockchain-based trading system for securities, including those linked to cryptocurrencies, that conforms with federal laws. Now those regulators have questions about his proefneming ter marrying Wall Street with a digital token. Overstock disclosed on March 1 that it had provided information to the U.S. Securities and Exchange Commission ter connection with an investigation of its ICO. Ter latest weeks the agency has sent a number of subpoenas to firms raising money through ICOs and to their advisers.
Byrne, who says Overstock wasn’t subpoenaed, views it spil all to the good. “,I think it’s way past due the SEC comes ter and looks at this,”, he says. “,I welcome it. I think it’s superb.”, The same day Overstock disclosed the SEC inquiry, it announced it had raised $100 million te a presale of tZero tokens at discounted prices. Overstock shares have doubled since September, when Byrne told Bloomberg News about his planned token toneelpodium.
Byrne’s eccentricities and grudge matches are legend on Wall Street, providing his idea of bridging the gap inbetween regulators and cryptorevolutionaries a whiff of irony. Overstock.com’s initial public suggesting ter 2002 introduced the shareholding public to an idiosyncratic CEO who has fought with Wall Street everzwijn since. He’s best known for his war against so-called naked brief selling, where investors bet a stock will druppel without very first taking the required step of borrowing shares, a practice he suggests brings ter large revenue for big banks. Overstock sued Merrill Lynch, Goldman Sachs Group Inc., and other brokerages te 2007, claiming they caused the company’s stock to druppel by abetting naked shorting. Byrne says the banks paid about $34 million to lodge the suits. Goldman and Canap of America Corp., which bought Merrill, declined to comment. Both banks denied the allegations at the time.
While Byrne has a Ph.D. te philosophy from Stanford, his treatment to critics has bot anything but nuanced. Te 2004 he emailed the author of a skeptical Fortune tv-programma story, “,So, why exactly did you become a reporter? Providing Goldman traders fellatios didn’t work out?”,
TZero reflects Byrne’s longtime preoccupation with naked brief selling. The immutable record of the blockchain, he says, will keep everyone fair. Grand predictions aside, a lotsbestemming about tZero sounds pretty conventional. Its assets include old-fashioned stock-trading businesses that Byrne acquired te 2016. Among the very first tokens set to trade on tZero is KodakCoin, Eastman Kodak Co.’s far-fetched effort to revive its fortunes with a blockchain to protect photographic copyright.
Some of the people behind the tZero toneel are unlikely blockchain innovators. They include two brothers who met Byrne during his anti-short-selling crusade: John and Derek Tabacco. At a tZero cocktail party te November at a Manhattan steakhouse, John wasgoed holding court, looking like a character from the movie Wall Street, ter a blue pinstriped suit with an American flag pocket square. He wasgoed banned from the securities industry te 1997 after working at a pair of sketchy brokerages. Together with his brother, who has appeared on the reality voorstelling Mob Wives, he ran a webstek called LocateStock.com that suggested some of the same services tZero plans. They sold it to a rock-hard called InvestView Inc. ter 2012 for about $Three million. Te November he called himself a co-founder of tZero and said he formed a “,cosmic brotherhood”, with Byrne overheen their mutual hatred of naked brief sellers. “,We’re on the leading edge of crypto,”, he said at the time. Byrne said ter an email that John Tabacco wasgoed an adviser, not a founder, and that he stopped doing any work for tZero earlier this year. Efforts to voeling Tabacco to go after up were unsuccessful.
Byrne’s pronouncements sound tame compared with some blockchain hype. Talk to crypto-entrepreneurs, and ending poverty is just one more voorwerp blockchain will cross off the global to-do list, along with tracking every fish ter the sea. Signs of mania abound: the fishmonger at Russ &, Daughters te Manhattan overheard passing ICO tips to a co-worker, or Katy Perry’s Instagram postbode of hier screws painted with the logos of cryptocurrencies. Last year, a pair of twentysomethings from Miami raised $30 million for a crypto debit card after securing the endorsement of boxer Floyd “,Money”, Mayweather.
Dan Gallagher, a former SEC commissioner, said at a conference ter February that the ICO market is “,the freaking Wild West–it’s Wolf of Wall Street on steroids.”, That hasn’t stopped him from serving on the houtvezelplaat of a blockchain company working with Byrne. One former fraudster who’s staying clear of ICOs is Jordan Belfort, the pump-and-dumper played by Leonardo DiCaprio te that filmrolletje, who says he’s bot solicited to endorse token sales but declines because he doesn’t want to go back to prison. “,It’s a ideal storm of manipulation,”, Belfort says. “,There’s no amount of money that someone could suggest mij that I would do this.”, –With Lily Katz and Jonathan Levin