(Adds additional details, comment from OTC markets)
By Suzanne Barlyn
July 24 A trading suspension in the stock of
little-known Cynk Technology, which mysteriously
surged 20,000 percent before the halt, ends late on Thursday,
but do not expect to see the stock trading again on Friday.
Shares of the Belize-based social media company, which were
traded on over-the-counter exchanges until the suspension on
July 11, soared over a few weeks despite having no revenue and
being described as a "development stage" company. At one point,
Cynk was worth more than $6 billion.
The swiftness of the rally in what had been a little-traded
penny stock prompted a temporary suspension by the U.S.
Securities and Exchange Commission that expires at 11:59 p.m.
EDT (03:59 GMT) Thursday.
The suspension was implemented to protect investors,
according to the SEC. Since then, there has been no comment from
the company nor regulator, and no new information has emerged to
explain the stock's meteoric rise.
As the suspension expires, brokerages said the chances of
the stock resuming trading are slim at best.
More than likely, the stock will only ever again trade in
the so-called "gray market," because no brokerage firm is likely
to be willing to make a market in the shares. Without a broker
to quote or advertise the stock, it can be nearly impossible to
locate shares to trade.
Brokerages wanting to market the stock must file a form with
FINRA, explaining that they are satisfied with any updated
Cromwell Coulson, president and chief executive at OTC
Markets Group, expects no brokerages to file the required
paperwork for Cynk to trade on exchanges, a spokeswoman told
Among the investors hurt by the sudden rally were those
shorting the shares - borrowing and selling in expectation of it
dropping. That can be dangerous with stocks that have little
liquidity, like Cynk, that go on a sudden run. Shares at one
point hit $21.95 on July 10 before closing at $13.90 that day,
the last day it was traded.
A pump-and-dump scheme involves a group of insiders who
conspire to drive up a stock's price, then lure in unwary
outside investors to buy the shares at an inflated price and
abscond with the proceeds.
The SEC and the Financial Industry Regulatory Authority, or
FINRA, which imposed the suspension, both declined to comment on
Regulators, nonetheless, typically do not take long to
investigate the types of concerns surrounding Cynk, said Andrew
Stoltmann, a lawyer in Chicago who represents investors in
securities arbitration cases.
An investigation that extends beyond Aug. 1 would be
surprising, Stoltmann said.
Regulators rely on trading records to determine the firms
that originated the trades, Stoltmann said. "It's a relatively
simple process to figure out."
(Reporting By Suzanne Barlyn and Rodrigo Campos; Writing by
David Gaffen; Editing by Cynthia Osterman)