Overstock, the online retailer founded by CEO Patrick Byrne, disclosed that the Securities and Exchange Commission is investigating its blockchain unit, known as tZERO.
The company said in an 8-K regulatory filing that the SEC informed it of the probe into tZERO, an initial coin offering (ICO) Byrne launched last December with a market cap of $250 million, and asked that it voluntarily provide documents related to the investigation. The online retailer said it is in the process of responding to the request and will cooperate with the government agency.
“It’s great that they’re doing this,” Byrne told FOX Business on Thursday. “I think that they’re sweeping up the ICO as a group – good for them. There’s a lot of flim-flam guys … I think it’s right that they’re sorta coming into the whole industry. It’s overdue.”
While an initial public offering (IPO) issues shares, an ICO issues digital coins. In Overstock’s case, tZERO is a securities token that trades like a stock or a bond. Currently, many companies issue utility tokens as part of their ICOs.
The news comes a day after The Wall Street Journal reported that the SEC issued “dozens of subpoenas and information requests” to companies involved in the cryptocurrency market. Byrne said his company is not part of the group that was summoned.
Regulators in the U.S. have begun cracking down on cryptocurrencies over the past few months. The SEC has issued investor alerts, bulletins and statements on ICOs and cryptocurrency-related investments to protect investors.
“Many promoters of ICOs and cryptocurrencies are not complying with our securities laws and, as a result, the risks are significant,” SEC Chairman Jay Clayton said early last month during a testimony before the Senate Committee on Banking, Housing and Urban Affairs.
The Overstock CEO said the company’s blockchain-based ICO adheres to SEC regulations and believes there should be government oversight when it comes to selling securities to the public.
The company became the first major retailer to accept bitcoin as a form of payment in January 2014 despite concern over the security of the world’s most-popular digital currency, which was created in 2009 by an unknown person or people using the alias Satoshi Nakamoto.
“Bitcoin’s been used by dubious actors to trade ecstasy, guns and stuff like that,” Byrne said. “The last time I checked, the U.S. dollar is used in those activities too. I’m not sure that makes the U.S. dollar evil.”
Overseas, regulators have also started to scrutinize bitcoin and other cryptocurrencies. China, in particular, has taken one of the strongest efforts to curb the use of digital currencies, which includes banning bitcoin exchanges.
“In the last four months, China has realized the true long-term implications of bitcoin and crypto are very anti-authoritarian,” Byrne said. “And it would bring the end of the big Chinese regime that’s allowed to persist in China. I think they’ve realized that, and that’s why they’re cracking down like hell in China.”
This story has been updated to inclue comments from Overstock.com CEO Patrick Byrne