BFFs Marc Cohodes and Patrick Byrne

Former hedge fund manager Marc Cohodes has been a long-time critic of and its wacky CEO, Patrick Byrne. The criticism dates back to the days when Cohodes was at Rocker Partners, a company that was sued by Overstock along with research firm Gradient Analytics. In 2005, Cohodes was fingered by Byrne as being part of a “miscreants ball” under the direction of a “Sith Lord.” Yet after more than a decade with a negative opinion of the company and its management, Cohodes recently did an about face.

Is money fueling the change of heart?

Sam Antar, another long-time critic of Overstock, details the Cohodes/Overstock situation nicely on his blog. The crux of the issue is that Cohodes (who has been focused on short selling) took a long position in Overstock in May 2017. A month later, Cohodes met personally with Byrne. In October, Cohodes hyped the company during a presentation at a Grant’s Interest Rate Observer conference, and said that Byrne is now his friend.

Also in October 2017, all negative references to Marc Cohodes were removed from Deep Capture, the site Patrick Byrne used to smear critics of Since then, Cohodes has been praising Byrne and how he runs the company.

The criticism of Byrne and Overstock has historically included discussions of accounting shenanigans. Note that accounting issues were real, as Overstock had to do multiple restatements of its financial statements. While the accounting mess is troubling and has obvious implications for investors, equally as troubling is the stalking done on behalf of Byrne.  Judd Bagley was an employee who appeared to head up the cyberspace attacks on Overstock critics. The most extensive activities included a smear site called Deep Capture.

Deep Capture was allegedly created to expose financial fraud, but the site has a long and sordid history of smearing journalists and investors who were critical of Overstock. Byrne hired Mark Mitchell to write content for the site, and some of that content led to a libel lawsuit. The suit was brought by Altaf Nazerali, a Vancouver businessman who was referred to on Deep Capture as a criminal, an arms dealer, fraudster, and more. That lawsuit ended with a $1 million judgment against Patrick Byrne, and:

The ruling said Byrne, Mitchell and Deep Capture LLC “engaged in a calculated and ruthless campaign to inflict as much damage to Mr. Nazerali’s reputation as they could achieve.” They engaged in a vendetta in which the truth “was of no consequence,” the judge wrote.

They tried to damage his reputation as much as possible, and then turned to blackmail. According to deposition testimony cited in the court judgment:

After his telephone conversation with the plaintiff, Mitchell emailed Mr. Byrne “this is going to be fun” and “I am going to talk to him on Friday and see if I can meet him in person”, and also “unless you [Byrne] have objections I am also going to suggest to him (I can do this in a roundabout way) that while I consider the facts to be correct, I am open to changing the story if he can provide other verifiable information that would be valuable”, and “I might even suggest that I will be willing to remove his name from the story altogether if he were to provide me with, say, trading records of global terrorist Yasin al- Qadi”, and lastly “if Nazerali agrees, nothing lost, after he gives me the information I will just put him back in the story. Sleazy, but, well it is what it is”;

Marc Cohodes was mentioned several times on Deep Capture, and the comments were not flattering. But following his change of heart on Byrne and Overstock, his name disappeared from those articles. The articles themselves stayed. The negative references to others stayed. But Cohodes’s name was removed.

Here’s an example with the original article on the left, and the article after it was edited in October 2017. I’ve highlighted the relevant parts:

It’s interesting that Cohodes could do an about face on someone that he previously described as crazy and unfit to run a public company. This is testimony given by Marc Cohodes during a deposition relative to a lawsuit between Overstock and Goldman Sachs.

Cohodes simply changed his mind? The company hasn’t changed one bit, nor has Patrick Byrne. But Cohodes wants to be friends with Byrne? According to a Bloomberg article:

Much has changed for Cohodes and Byrne since those days. For one, the two men have put aside their differences and become friends. Cohodes now operates as a private investor from a farm north of San Francisco, where he’s had success shorting Canadian companies including Concordia International Corp. and Home Capital Group Inc.


Byrne, for his part, is philosophical about having his former short-seller foe as a new and friendly shareholder.

“When he started reaching out to me, I was worried about, you know, was he going to plant a bomb in my living room or something,” Byrne said, joking about Cohodes. “I couldn’t believe that my old enemy was reaching out to me,” he said. Still, he welcomes the development. “How strange it is that we have found, after it all, that we could bury the hatchet, and not in each other’s necks?”

There is an obvious question here. Is the change of heart related to the Cohodes’s investment in Overstock’s shares? Is he hyping the company simply to make his investment pay off? It’s a fair question to ask.

Since being called out on this strange about face, Cohodes apparently was working behind the scenes to get people to stop criticizing Patrick Byrne on Twitter. Sam Antar says that Cohodes told him to “lay off Byrne,” and that other parties received similar communications.

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