Patrick Byrne: "Hedge Fund Community and Wall Street Banks Form An Oligopoly"
Byrne, the president and CEO of Overstock.com, Inc. (NASDAQ: OSTK), gives serious credit to the Department of Justice and the FBI for the work they've done. “And there is no love lost between me and the Feds,” he said. “I really don't like the Feds. I've been under federal investigation for the past six years. When they finish one investigation they start another. It just goes on and on.”
That, Byrne says, is the downside to his crusade against naked short selling, which he believes ticked off some really powerful people on Wall Street. “I was told that this would happen – that I would be retaliated against and I'd be subject to endless investigations until I shut up,” Byrne reveals.
“That said, I know that the hedge fund community and the Wall Street banks basically form an oligopoly,” he continues. “They are so powerful, they have news papers and specific journalists on their side. They have senators and regulators on their side, so to get the FBI and the Department of Justice to go after these people has really taken some spines, which the SEC showed long ago they lacked. I have to give the FBI and the Department of Justice mad props because they must have sifted through a lot of political pressure to prevent them from [doing] what they're doing now.”
With regard to his critics, who say that naked short selling is just another way to blame falling stock prices, Byrne said that it's not about Overstock. “It's not about blaming short sellers,” Byrne insists. “That's all the spin that they put on it to keep anyone from thinking about this. What we're saying is that there's a huge amount of illegal, inappropriate activity on Wall Street through a network of hedge funds and the prime brokers who serve them, primarily centered on Steven Cohen, SAC Capital and Goldman Sachs.”
Byrne said that there are some “hack journalists” on Wall Street – who more or less work for these guys – who tried to prevent anyone from listening to him by saying, “Oh, this guy's just mad at short sellers.”
“I say, forget me,” Byrne replies. “Look at the data that says this stuff has been going on. I don't think that it's even a serious argument that they make.
“Or, if it is, then it means that when we make money…if they were willing to say, ‘Byrne is losing money, so he must be wrong about his claims about Wall Street,' I get to say that, ‘Now that I'm making lots of money…does that make me right about Wall Street?'”
The truth, he said, is that no, it doesn't him right about Wall Street. “But when we were losing money in our startup phase it didn't make me wrong either. But that was a mental leap that the Jim Cramer crowd could bring themselves to cross. I think that's because the Jim Cramer crowd was in on it, as Cramer more or less admitted on that famous video he made on Jon Stewart.”
Deep Capture supplied Stewart with that video.
“Jim Cramer used lawyers to get it taken down everywhere else on the Internet,” Byrne revealed. “That wasn't gonna happen with us. He's just a bully. Bullies are all like that. If you stand up in their grill, they put their tail between their legs. He did not get it off our site, and Comedy Central used it to great effect, I thought.”
In the video, Cramer explained how he used the financial press to manipulate stocks. “That is all I was saying,” Byrne said. “He makes clear that he used certain financial reporters that he used as lap dogs. A number of e-mails have become available, through various court cases, e-mails between hedge funds and reporters that are wildly inappropriate. And it's all up there on Deep Capture. It's crystal clear that an inappropriate relationship has developed within the New York financial community and the media that report on them.”
When asked if there were any other companies Byrne wanted to shed some light on, he replied, “I think the companies that are spin-offs of SAC Capital would be the second place I would look. I think that Dan Loeb at Third Point… I've already settled my beef with another hedge fund called Rocker Partners. We took care of that.”
However, Byrne cautioned that he isn't going to do anything to divert attention away from Cohen. “[The focus is on] Cohen, Maverick Capital, [and] Pequot Capital, which was shut down last year,” he said. “But if you go into Deep Capture, look up Jim Chanos.”
Why Jim Chanos? “Look at it this way, Eliot Spitzer's [mistress], Ashley Dupre, was living in the house of Jim Chanos. Jim Chanos was Eliot Spitzer's biggest donor. That's all been publicly reported and acknowledged and Chanos said he didn't know who she was, he didn't know she was servicing Eliot Spitzer… Well that may all be.
“But if it isn't, put it this way: if any hedge fund was involved in the procuring of hookers for Eliot Spitzer, that hedge fund owned himself the Attorney General of the state of New York. Right? If you bring him hookers, you own him. And if you look at the list of the companies shorted by Cohen and Chanos and guys in that little circle, and then you compare it to the list of companies Eliot Spitzer went after, you'll see a remarkable coincidence. So that raises lots of possibilities.”
To hear more from the Overstock.com CEO – including his thoughts on a real Sith Lord – don't miss Benzinga's full interview with Patrick Byrne:
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