The Wall Street Journal - 23.08.2019

A8| Friday, August 23, 2019 **** THE WALL STREET JOURNAL.

WORLD NEWS

Backers of Simon Cheng, a British consulate employee held by China, demand his release in Hong Kong.

CHRIS MCGRATH/GETTY IMAGES

Patrick Byrne, center, has overseen the company since 1999.

GEORGE FREY

Seoul Ends

Pact With

Japan

FROM PAGE ONE

CEO of

Overstock

Resigns

ferences, which have been exac-
erbated by trade disputes.
“We’re disappointed to see
the decision that the South
Koreans made about that in-
formation-sharing agree-
ment,” Mr. Pompeo said, not-
ing that he had spoken with
South Korea’s foreign minister
earlier in the day. “We’re urg-
ing each of the countries to
continue to engage.”
Another senior Trump ad-
ministration official was more
pointed. “This is laying bare
fundamental questions about
the Moon administration’s
commitment to our collective
security,” the official said, re-
ferring to South Korean Presi-

ContinuedfromPageOne

dent Moon Jae-in.

Seoul’s decision to walk

away from the intelligence

deal means South Korea won’t

share information directly

with Japan. But it can still do

so indirectly through the U.S.,

an arrangement U.S. officials

described as more limited and

less efficient.

“The information-sharing

structure for Northeast Asia is

now fundamentally weaker,”

said Vincent Brooks, a retired

army general who served as the

top U.S. commander in South

Korea from 2016 to 2018.

Under the now-discontin-

ued deal, reached in 2016,

Japan and South Korea have

had a direct channel of com-

munication for sensitive mili-

tary information such as de-

tails of North Korean missile

launches and troop move-

ments, as well as intelligence

on other regional powers such

as China and Russia.

The arrangement, known as

the General Security of Mili-

tary Information Agreement,

was advocated by the Obama

administration to bolster re-

gional security and was sched-

uled to renew automatically

unless either party provided

90-days-notice that it was

pulling out.

Relations between South

Korea and Japan have become

increasingly tense.

In July, Japan moved to

tighten export controls on

three materials crucial for

South Korean companies to

produce semiconductors and

displays, and this month re-

voked Seoul’s preferential-

trading-partner status.

Tokyo cited concerns that

Seoul wasn’t doing enough to

ensure products from Japan

couldn’t be shipped to third

countries that represent a se-

curity risk.

Tetsuo Kotani, a security

expert at the Japan Institute

of International Affairs, a To-

kyo-based think tank, said that

the closure of a direct channel

raises risk in the region during

fast-moving events.

It increases uncertainty for

Tokyo in the immediate after-

math of North Korean missile

launches, he said, because

South Korea’s proximity to the

North means it usually has the

first information about projec-

tiles being fired. South Korea

may not benefit as much from

access to information from

Japan’s eight reconnaissance

satellites, which monitor North

Korea and track missile

launches.

China and North Korea, Mr.

Kotani added, would welcome

the deepening divisions be-

tween the two U.S. allies. Last

month, China and Russia car-

ried out a joint bomber patrol

with aircraft capable of carry-

ing nuclear weapons over the

waters between South Korea

and Japan.

The senior Trump adminis-

tration official said such a

maneuver “would not have

happened” without the erod-

ing alliance structure because

of the dispute between Seoul

and Tokyo.

Gen. Brooks said that Presi-

dent Moon’s administration

may have had multiple reasons

for its decision, including “try-

ing to essentially shock the

U.S. into mediating action” af-

ter the Trump administration

indicated it wasn’t going to

play such a role.

He added that Seoul might

simultaneously be trying to gain

leverage in its trade disputes

with Tokyo while attempting to

curry favor with North Korea,

which has been recently critical

of President Moon.

Domestic politics, other ex-

perts said, is also a factor.

Japanese Foreign Minister

Taro Kono called the South

Korean decision “extremely

regrettable.” He said Seoul

“completely misread the re-

gional security environment”

and improperly linked the

military pact with the dispute

between the two countries

over trade.

“The United States, in my

opinion, is now the only one

who can solve this,” said Pat-

rick Gerard Buchan, who

served as Australia’s represen-

tative at the Pentagon and is

currently at the Center for

Strategic and International

Studies, a Washington-based

think tank.

“I think it would send a

very good signal if [Defense

Secretary Mark] Esper got on

a plane in the next few days

and went to Seoul and went to

Tokyo for discussions,” he

added. “It would also send a

signal to the Koreans that ‘I

mean business.’”

—Eun-Young Jeong in Hong

Kong and Courtney McBride

in Washington contributed to

this article.

The decision to scrap

the deal comes amid

disputes between

Seoul and Tokyo.

“This is just a distraction,”
Mr. Antar said. Overstock, he
noted, has an accumulated
deficit of more than $500 mil-
lion, losses he blamed on Mr.
Byrne’s management. “The
guy’s an overrated loser.”
Mr. Antar was convicted of
securities fraud while chief fi-
nancial officer in the 1980s at
the New York company Crazy
Eddie. After serving time un-
der house arrest, he became a
white-collar-fraud expert.
Overstock was created to
sell surplus jewelry, handbags
and other goods. Mr. Byrne
bought a majority stake in
1999, a heady time for e-com-
merce.
He soon set out to profit off
the wreckage of the dot-com
bust, buying millions of dol-
lars in inventory from dis-

ContinuedfromPageOne

tressed online retailers before

relisting those items on Over-

stock’s website.

“I realized in the last couple

of months that there’s a cer-

tain theme to my life—bottom-

feeding,” Mr. Byrne told The

Wall Street Journal in 2000.

Mr. Byrne is the son of Jack

Byrne, a longtime insurance

executive who rescued Geico

from near-bankruptcy and

turned around Fireman’s Fund

Insurance Co. Warren Buffett,

whose Berkshire Hathaway

Inc. was one of Geico’s largest

shareholders during the elder

Mr. Byrne’s tenure, called him

the “Babe Ruth of Insurance.”

What brought the younger

Mr. Byrne into the spotlight,

though, was his attention-

seeking antics.

He crusaded against money

managers who bet against

Overstock’s shares, and in

2004 spent $13 million buying

stock in an attempt to create

losses for short sellers.

The following year, Mr.

Byrne posited that a “Sith

Lord or mastermind”—a refer-

ence to a Star Wars villain—

was trying to destroy the com-

pany’s stock and complained

about negative press coverage,

including in the Journal.

Mr. Byrne’s obsession with

short sellers drove his father

to resign from the board in

2006. “I can’t tell whether this
      ‘jihad’ adds to the value of the
      stock or subtracts from it, but
      what it does is takes from Pat-
      rick’s time,” the elder Mr.
      Byrne told the Journal that
      year, though he returned to the
      board in 2010. He died in 2013.
      A website funded by Mr.
      Byrne, called Deep Capture, at-

tacked his critics. The site and

Mr. Byrne were found guilty of

defamation in 2016 by a court

in British Columbia and or-

dered to pay a Canadian man,

Altaf Nazerali, about 1.2 mil-

lion Canadian dollars

(US$900,000). The judge in

the case said Mr. Byrne and

the site acted with “express

malice” against Mr. Nazerali.

More recently, Mr. Byrne

was known for his not-always-

successful forays into crypto-

currencies. In 2015, Overstock

rented out Nasdaq Inc.’s Times

Square offices to throw a

splashy launch party for tZero,

a crypto exchange he planned

to build.

The site launched earlier

this year. It has only a few as-

sets listed to trade, and no

material trading volume.

Overstock also had hoped

to raise millions of dollars by

selling digital tokens related

to tZero. It has fallen short on

its fundraising goal, and the

offering is under SEC investi-

gation.

The agency has settled with

other companies that it ac-

cused of not properly register-

ing similar tokens. Overstock

said in regulatory filings this

year the SEC was expanding

its Overstock investigation

into “certain public statements

made by us.”

Overstock also had hoped to

get a big cash infusion from a

Hong Kong-based private-equity

firm for tZero. Most of that

money hasn’t come through, ac-

cording to regulatory filings.

In a press release this

month, Mr. Byrne said he was

confirming previous reports

that he had had a relationship

with Ms. Butina, who pleaded

guilty to accusations that she

tried to influence U.S. policy in

favor of the Kremlin.

Mr. Byrne also said he was

working with law enforcement

on other matters.

A lawyer for Ms. Butina,

Robert Driscoll, said he appre-

ciated that Mr. Byrne “came

forward.” “I think his allega-

tions are serious and the gov-

ernment should respond with

transparency,” Mr. Driscoll said.

Mr. Byrne had long stated

that he intended to split Over-

stock and the company’s

crypto operations into two

separate companies. Several ef-

forts to find a buyer for Over-

stock failed to produce a deal,

however, and earlier this year,

Mr. Byrne abandoned the plan.

Jonathan Johnson, a board

member and president of Med-

ici Ventures, will be interim

chief executive, the company

said.

The stock has swung wildly,

posting double-digit percent

losses and gains many days

this year. On Thursday, it rose

8.3% to $21.12.

—Aruna Viswanatha

contributed to this article.

HONG KONG—Chinese police
alleged that a British consulate
employee from Hong Kong, de-
tained during a business trip to
the mainland this month, had
committed a prostitution-re-
lated offense, but offered no de-
tails or evidence to back up the
allegation on Thursday.
The assertion, by police in
Shenzhen, was met with skepti-
cism in Hong Kong. On a Face-
book page built by the man’s
friends to call for his release,
hundreds of comments ques-
tioned the credibility of the alle-
gations.
Simon Cheng, a Hong Kong
citizen who works as a trade
and investment officer at the
U.K. mission in the city, disap-
peared on Aug. 8. Before his

BYWENXINFAN
ANDEUN-YOUNGJEONG

be imposed for up to 15 days,

both as punishment and to al-

low questioning of suspects.

Mr. Cheng’s girlfriend de-

clined to comment on the new

police announcement. She told

The Wall Street Journal that the

family hasn’t received any no-

tice about Mr. Cheng’s release

date and their lawyer has yet to

meet with Mr. Cheng.

The Facebook timeline of Mr.

Cheng, 28 years old, includes

photos of him with prominent

Hong Kong opposition figures

from the Umbrella Movement.

They include Edward Leung,

currently in jail after being con-

victed of rioting, and Alex Chow,

a pro-democracy campaigner.

Mr. Cheng’s detention under-

scores the lack of transparency

in China’s legal system, an issue

that lies at the center of opposi-

tion protests in Hong Kong,

which were triggered by a pro-

posed law that would have al-

lowed people to be extradited to

mainland China. The proposal

has since been suspended, but

not formally withdrawn as pro-

testers demand.

trip to the mainland, he had

posted a message on Facebook

supporting the antigovernment

protests that have swept Hong

Kong this summer.

“We continue to urgently

seek further information about

Simon’s case. Neither we nor Si-

mon’s family have been able to

speak to him since his deten-

tion,” said a representative for

the U.K. Foreign Office.

Shenzhen police on Thursday

confirmed a report in the Chi-

nese state-run tabloid Global

Times that said Mr. Cheng’s de-

tention was prostitution-related

and began Aug. 9. The police

said Mr. Cheng asked police not

to inform his family.

On Wednesday, Chinese offi-

cials in Beijing said Mr. Cheng

had been detained for unspeci-

fied alleged violations of the

country’s Public-Security Ad-

ministration Punishments Law.

The law covers offenses deemed

minor enough to be punished

with fines or short-term deten-

tion—and includes offenses such

as visiting prostitutes.

Administrative detention can

Chinese Police Detail

Hong Konger’s Charge

Shenzhen authorities

link British consulate

worker to prostitution;

allegations raise doubts

South Korean President Moon Jae-in discussed the decision to withdraw from the country’s pact with Japan with policy makers Thursday; Japanese Foreign Minister Taro Kono said the move was regrettable.

YONHAP/EPA/SHUTTERSTOCK KYODO/REUTERS

Google Disables

YouTube Channels

Google pulled 210 YouTube

channels from its platform, say-

ing they appeared to be part of

a disinformation campaign in

response to pro-democracy pro-

tests in Hong Kong.

Twitter Inc. and Facebook

Inc. made similar moves this

week, citing evidence the Chi-

nese government was behind ef-

forts to discredit the protesters.

“This discovery was consis-

tent with recent observations

and actions related to China

announced by Facebook and

Twitter,” Google wrote in a blog

post. It didn’t specifically blame

Beijing for the campaign.

Chinese officials have said

the Facebook and Twitter posts

were made by Chinese citizens

living overseas and expressing

their views on the protest.

The activity has invited

comparisons to Russia’s Inter-

net Research Agency, accused

by the federal prosecutors of

engaging in a state-sponsored

influence campaign during the

2016 U.S. presidential election.

—Robert McMillan