A Utah federal judge dismissed a lawsuit in which Overstock ($ OSTK) was accused of market manipulation by distributing “digital dividends” from security tokens to shareholders and repeatedly revising guidelines for recharge retailers to punish card merchants.

U.S. District Judge Dale Kimble approved two motions to dismiss the lawsuit on September 28, finding that digital profits were not manipulating the market and that the revised earnings data were protected by the Securities Litigation Reform Act. Kimball said in his verdict:

“On the day Overstock announced the dividend payment, market watchers realized and announced that digital dividends would put card merchants in trouble by forcing them to cover their short positions to avoid breaching existing contractual obligations.”
The lawsuit was filed by Mangrove Partners Master Fund in September 2019, two months after Overstock, a former online retailer that became a cryptocurrency seller, announced its digital earnings. The air dividend distribution facilitated the release of OSTKO securities to increase shareholder shares at the rate of one symbol for every ten shares.

Mangrove argued that the terms prohibiting the sale of the token within six months of distribution were intended to make it difficult for minors to access their websites, and accused Overstock of creating an artificial short clip.

The US Securities and Exchange Commission later launched an investigation into Overstock and its executives and archived earnings records as well as contacts with former CEO Patrick Byrne.

Judge Kimball ruled that Bavaria’s “public disdain” for the mansion (and he made many sarcastic comments about them) had nothing to do with the case, as “making a profit was a legitimate business purpose.”

He described the lawsuit as “a classic attempt to retrospectively defend fraud.”

In his address to Law360, Byrne’s attorney Robert Driscoll said, “Federal securities laws do not act as investment insurance and the court agrees.”

Source: CoinTelegraph

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