Over six weeks ago we were the first to bring the investing world's (and SEC's) attention to CYNK technologies - a revenueless, assetless 'social network' shell that rapidly exploded in price and market cap soared to $6 billion. Since then it has come crashing back to 'sanity' levels - i.e. worthless - and now, as WSJ reports, The Securities and Exchange Commission is investigating. Their initial findings show a number of 'repeat offenders' linked to several stocks that suffered suspicious trading - just as we noted here...
Even in the boom-and-bust universe of penny stocks, Cynk was a supernova—soaring 36,000% before the SEC suspended trading, then losing almost all of the gains after the halt was lifted.
Cynk's eye-popping valuation—given it reported no assets and only one employee—briefly made it the talk of Wall Street. But the affair also highlighted a complex web of people who were connected to Cynk and other microcap companies that have soared and sagged.
Peter Messineo, a 53-year-old accountant from Palm Harbor, Fla., is the auditor being scrutinized. He is one of a number of "repeat players" linked to several stocks that suffered suspicious trading who are being looked at by the SEC, as it shifts its tactics in its battle against penny-stock fraud, the people said.
The SEC is looking at whether some lawyers and accountants are liable for helping to enable penny-stock frauds, either by signing off on phony information or simply not asking the right questions, said people close to the agency.
Mr. Messineo, who hasn't been accused of any wrongdoing, said he was just a "bystander" at the Cynk stock blowup and there is no reason he should come under scrutiny. "The SEC should look into whatever they want to, that's their job. But I had no connection to any suspicious trading and I stand by my audits," he said.
The Public Company Accounting Oversight Board, which polices auditors, said its routine 2011 inspection of Mr. Messineo showed "deficiencies" in his audits.
The SEC still is investigating what happened with Cynk, said people close to the agency. It isn't clear who, if anybody, made significant profits from the stratospheric stock increase. A representative of Cynk couldn't be reached for comment.
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In summary - you're welcome SEC. But, of course, all the time the Fed is encouraging the dash-for-trash trade with its ever increasing put strike, this kind of fraud will continue to find willing get-rich-quick investors to to fuel the insanity.