Overstock.com Wins Major Court Victory Against Brokerages

Overstock.com won a major court victory today over Morgan Stanley & Co. Incorporate, Goldman Sachs & Co,. Citigroup Inc., and other large prime brokerage firms, according to a press release from the company.

California Superior Court for the City and County of San Francisco issued a ruling today that the claims of market manipulation under California securities law made by Overstock.com and the co-plaintiffs were viable. Overstock had accused some of the largest brokerage firms in the country of executing naked short sales of company stock. Overstock alleged that the defendants deliberately manipulated the market price for those shares. The court granted Overstock and its co-plaintiffs the right to amend their claims of restitution under the Unfair Business Practices Act and to specifically plead the factual basis of the claims made against the defendants. Overstock.com is one of the largest close-out retailers on the Internet, specializing in overstocks and slightly imperfect merchandise.

Judge Munter did not agree with the defendants' claims that the complaint was overruled by Federal law and that, as a legal matter, 'phantom' shares were not created by the naked short selling of Overstock's shares.

Judge Munter's ruling clears the way for the$3.48 billion case to make it to trial. Jonathan Johnson, Senior Vice President of Overstock Legal said, "This is a huge win for us. We are eager to start discovery and move this case to trial. The day we expose in detail the defendants' misconduct to a jury will be a good day for Overstock, its shareholders and the capital markets."

Overstock Chairman and Chief Executive Officer Patrick Byrne added, "As I listened to defendants' counsel argue that phantom shares don't exist because the SEC says they don't exist, I was reminded on Abraham Lincoln's favorite joke: 'If you call a tail a leg, how many legs does a dog have?' 'Five?' 'No, four -- because calling a tail a leg doesn't make it a leg.' Defendants create phantom shares by facilitating naked short selling and other types of trades which result in failures-to-deliver. This is manipulative and illegal -- regardless of what the industry's all-too-cozy regulatory agency says."

Overstock's suit alleges that the defendants concocted a large, illegal scheme designed to manipulate the stock market and that the brokers involved had no intention of covering orders with borrowed stock, as they are required, by law, to do. Overstock claims that such actions caused a dramatic drop in company stock, from which the company is still suffering.

Overstock.com is one of the largest close-out retailers on the Internet, specializing in overstocks and slightly imperfect merchandise. Source: Overstock.com Press Release: (http://media.prnewswire.com/en/jsp/latest.jsp?beat=BEAT_ALL&view=LATEST&resourceid=3516935)