The shares of CYNK Technology Corp (OTCMKTS:CYNK), a development-stage company that intends to develop a social network business plummeted more than 85% to $2.25 per share at the time of this writing, around 1:28 in the afternoon in New York.
The stock price of CYNK Technology Corp. (OTCMKTS:CYNK) suffered an immediate decline after the Securities and Exchange Commission (SEC) lifted the suspension of the trading for the shares of the company. The regulator halted the trading of the stock on July 11 due to suspicions that it is a part of an illegal activity.
CYNK Technology: Pump-and dump scheme
CYNK Technology Corp. (OTCMKTS:CYNK) attracted the attention of the SEC after its stock price suddenly surged 36,000% in just three weeks from $0.10 per share on June 17 to as much as $21 per share on July 10. The stock price of the company went down to $13.90 a share prior to the directive of the SEC to stop its trading.
The market capitalization of the company temporarily went up to around $6.4 billion, making it more valuable than Zynga Inc (NASDAQ:ZNGA) and AOL, Inc. (NYSE:AOL). The situation ignited speculations that CYNK Technology Corp. (OTCMKTS:CYNK) is part of a well-orchestrated pump-and-dump scheme.
Short-sellers became panic buyers
Linda Riefberg, a former chief counsel of the enforcement department of Finra told the New York Post that it appeared that those who bought the fast-rising shares of CYNK technology Corp. (OTCMKTS:CYNK) “thought they were smarter than the penny-stock investors,” and “sold the stock short.”
The law allows short-sellers to borrow stocks before shorting it. They sell the stocks and they are hoping to buy it back at a lower price later to gain profit. Some of the short-sellers went “naked” and did not worry about covering their short until the settlement date.
Short-sellers appeared to have been squeezed with the case of CYNK Technology Corp. (OTCMKTS:CYNK) as they are faced with settlement dates and SEC violations for being exposed as naked. According to the report, the short-sellers became panic buyers sending the stock price of the company even higher.
Riefberg pointed out, “They can’t blame their fate on stock promoters who encouraged then to buy the stock citing the reason that it is going up. She said, “Because they didn’t act on that advice but, when you think about it, did just the opposite.” Riefberg is offering legal counsel to individuals accused of violating securities laws,