NEW YORK (Reuters) - A New York trader claims he lost his job over the dramatic run-up in Cynk Technology Corp stock, which at one point last week had a market value of about $6 billion dollars before trading was halted on suspicion of manipulation.
Tom Laresca, 52, said he held a short position in Cynk as a market maker while clients were trying to buy the stock, which rose more than 20,000 percent in a matter of weeks.
“As a market maker, you try to provide liquidity,” he said.
Laresca’s story took a bad turn after he was asked by his employer, brokerage Buckman, Buckman & Reid, to cover his short position as losses mounted.
Cynk, an obscure over-the-counter company, became one of the market’s biggest stories last week as the little-traded stock’s volume exploded. For a brief period, it had a market value of more than $6 billion, which is unusual for a “development stage company” - as it described itself - with no revenue.
Shorts sell securities on the expectation of a decline in price, at which point they buy the stock back, return it to the lender, and pocket the difference. The danger for shorts is that a stock can rally sharply, resulting in big losses, and in this case, Laresca said he wanted to close his short, but liquidity had dried up.
Laresca was later barred by his company from holding any stock positions.
“That made it impossible for me to stay there,” he said. “I‘m not blaming my firm, they just weren’t willing to take the risk. I feel bad for what happened.”
John “Chip” Buckman, managing director at Buckman in Shrewsbury, New Jersey, said in a statement that Laresca was barred because he mishandled the situation.
“In the firm’s opinion, Mr. Laresca, who is a veteran trader, did not manage his Cynk Technologies position properly,” Buckman said.
“We temporarily restricted his trading activities, but did not terminate Mr. Laresca’s position. He decided to resign this morning and we wish him the best.” Laresca, who lives in the borough of Staten Island in New York City, had been registered with Buckman since November 2012, according to regulatory data. His story was first reported by Bloomberg.
He said he felt the price surge was a scam and sent a fax to the U.S. Securities and Exchange Commission alerting them to it. A suspension of the stock while he held his short would have likely meant his trade made money, but by the time he alerted regulators, he was already out of his position, he said.
The SEC, which was not immediately available to comment, has not brought any charges yet against Cynk or anyone involved.
Securities lawyers and market participants, however, think it is very unlikely the stock will trade again on exchanges.
Cynk, which SEC filings show formerly was called Introbuzz, was hardly ever traded until about a month ago. In May, the stock was worth about 13 cents a share and had only traded on three days this year before its unusual surge in mid-June.
Beginning on June 17, the shares rocketed from 10 cents to as much as $21.95 at one point. The stock closed at $13.90 on July 10 before the SEC suspension.
A document posted on the OTC Markets website, the operator of the exchange where Cynk trades, lists Javier Romero as the sole officer and director of the company and holder of nearly 72 percent of its stock.
But the address for the company in Belize City, Belize, does not exist and a telephone number for the company in SEC filings from earlier this year reached an automated recording saying: “You have reached an unassigned number.”
The company has no assets or revenue and its stock price soared for no apparent reason before the halt.
“In a fair game (the price) would have come down, but this was not a fair game,” Laresca said.
He has no immediate plans after leaving Buckman, Buckman & Reid.
“I honestly don’t know,” he said. “It’s not like I was prepared for this.”
Reporting by Rodrigo Campos. Additional reporting by Robin Respaut in San Francisco. Editing by Andre Grenon