Overstock Shares Fall Amid Token Sale Probe

After a U.S. regulator asked Overstock.com for information related to its planned sale of digital tokens, the eCommerce retailer’s shares tumbled more than 10 percent on Thursday (March 1), Bloomberg reported.

Through a regulatory filing, Overstock disclosed that the Securities and Exchange Commission (SEC) asked the company in February to provide information on its token sale. The company seeks to offer tZERO tokens, which buyers and sellers may be able to trade on Overstock’s exchange platform.

In October, Overstock said it would offer simple agreements for future tokens (SAFTs) to accredited investors. But the SEC is reportedly cracking down on these types of agreements and is probing advisers and tech companies involved with crypto, the The Wall Street Journal has reported.

Now, Overstock is considering the contracts to be simple agreements for future equity (SAFEs). As of Thursday (March 1), the company said 1,100 investors have entered into agreements to purchase approximately $115 million worth of tokens.

In December, Medici, the blockchain unit of Overstock.com, announced the launch of tZero, an alternative trading system that is creating a platform to exchange cryptocurrency tokens in the U.S.

According to a report in CoinDesk, the first-of-its-kind alternative trading system (ATS) would be regulated by the SEC and the Financial Industry Regulatory Authority (FINRA). To offer the ATS, Overstock’s Medici teamed up with RenGen, a FinTech that will act as the market maker, and Argon Group, an investment bank focused on initial coin offerings (ICOs).

Rather than relying on broker-dealers to buy and sell securities, tZero hooks up buyers and sellers in a so-called dark pool. The idea is to develop an alternative to the NASDAQ using blockchain technology that is open and transparent.

The premier of tZero marks the first regulator-approved way for U.S. investors to trade cryptocurrency. “I think it’s a historic event,” Patrick Byrne, chief executive of Overstock.com has said. “We’re opening a new type of capital market.”