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The ugliest chapter in the strange story of CYNK Technology Corp. (OTCMKTS: CYNK) played out this morning (Friday) as the U.S. Securities and Exchange Commission's trading halt was lifted.
CYNK stock, which soared more than 24,000% in less than four weeks from mid-June to mid-July, cratered more than 80% at the open, falling from $13.90 to $2.50.
"There was probably a lot of money made and lost in this," Michael Block, chief strategist at New York-based Rhino Trading Partners LLC, told the Financial Post. "It's going to be a cautionary tale of people manipulating stocks and participating in run-ups."
OTC Markets, where CYNK stock previously traded, said it would no longer trade on its venues. Instead brokers need to trade the stock by phone in what's known as the "grey market."
Nevertheless, by noon Friday CYNK volume was over 272,000 shares – more than eight times the average.
The previously obscure penny stock drew scrutiny after its price rose from $0.10 in mid-June to as high as $21.95, which briefly put the company's market cap at $6 billion. Even at its previous close of $13.90, CYNK was worth more than such companies as Regal Entertainment Group (NYSE: RGC), Advanced Micro Devices Inc. (NYSE: AMD), and U.S. Steel Corp. (NYSE: X).
And yet the company, which purported to run a social networking website intended to be a "referral service for introductions," had never earned any revenue. In fact, CYNK had lost $1.5 million as of the end of 2013, and had but a single employee.
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Given its flimsy business, the extraordinary run-up in CYNK's stock price looked very fishy to the SEC, which halted trading on July 11 "because of concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in CYNK's common stock."
And while the SEC has been mum on whether it has uncovered any evidence of such manipulation, CYNK sure looks like a classic pump-and-dump scheme – albeit on steroids.