"My 10-year-old knew it was a scam. It was a complete joke," rages Tom Laresca - a market-maker at Buckman Buckman & Reid - who sold "pure madness" stock CYNK Technology short at $6 last week. Laresca assumed (reasonably so) that the SEC would suspend trading, sending the price towards zero. Despite Zero Hedge's initial exposure of this farce to the world (and the rest of the mainstream media's attention following), the SEC was slow and CYNK soared to $16, squeezing Laresca and forcing his firm to cut off his ability to hold positions - he plans to resign today. "I wish people would just not trade the stupid things."
As Bloomberg reports, a Wall Street trader said Cynk Technology Corp.’s (CYNK) 36,000 percent stock surge cost him his job, and he blames a short squeeze and regulators who didn’t halt the shares before the company’s value shot past $6 billion.
“The stock looked worthless, if there’s even a company behind it,” Laresca said. “My 10-year-old knew it was a scam. It was a complete joke.”
He sold it short last week around $6 -- which means selling stock you don’t own with a plan to buy it cheaper soon, pocketing the difference. Laresca figured the Securities and Exchange Commission would suspend trading, sending the price toward zero.
Instead of falling, the share price more than doubled the next day, July 9, starting the squeeze. Market-makers who had sold the stock short got nervous and scrambled to buy stock to close their positions, driving it even higher, Laresca said.
“If you’re short, you have to buy it within five days,” Laresca said of market-making rules. “That’s what was driving the stock higher.”
The SEC stopped trading two days later, citing concerns about the accuracy of information in the marketplace and “potentially manipulative transactions.”
That was too late, Laresca said, and slammed the SEC...
“When it goes from 6 cents to $16 and you haven’t done anything about it, I’m sorry but you fell asleep at the wheel,” he said. “Everybody knew it. How come they didn’t know it?”
While Cynk’s $6 billion paper valuation was unusual, spikes and crashes are common in the over-the-counter markets where it traded. Regulators bust alleged pump-and-dump scams there regularly. Many involve defunct companies, or shells, with shares that still trade. The SEC has suspended trading in at least 255 shells this year.
“You lure other people into the marketplace, whether they believe it’s legit or they’re just along for the pump and believe they can get out before the dump,” Sporkin said. “It’s like a big game.”
The end result of this farce... more unemployment...
Laresca said that his firm cut off his ability to hold positions after the Cynk fiasco and that he plans to resign today. He declined to say what the trades cost.
OTC Markets Group Inc., which runs the trading venue once known as the pink sheets, marks questionable stocks on its website to warn investors. It branded Cynk with a skull and crossbones. Cromwell Coulson, the trading venue’s chief executive officer, who predicted the SEC suspension, said the agency will eventually figure out what happened with Cynk.
“I wish people would just not trade the stupid things,” he said.
It's not just Laresca who has a major problem, as we noted previously - cost of carry on the short is adding up all the time CYNK is halted...
Case in point, this sad individual who on that bulletin board of epic retail investor comedy, Yahoo Finance, has explained their problem: it appears some brokers actually did allow shorting of CYNK, at a cost. A rather high and recurring cost it would appear.
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But all the other momo stocks trading at triple-digit P/Es are not stupid...? Or are they - according to Yellen?