Last week, the financial world goggled in astonishment at the meteoric rise in the CYNK Technology Corp stock. Cynk, a supposed social-networking company, is a business which appears to have one employee, large losses, no turnover, and no assets. However, what Cynk does have is a $4.5 billion stock market valuation: numbers that clearly don’t add up to the baffled financial world.
In the past month, Cynk’s stock rose more than 30,000 percent, casually moving from 6 cents to $18.21 by last Thursday. According to its last filing with the SEC, Cynk’s one employee, Marlon Luis Sanchez, happens to be the company’s President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Secretary and Treasurer. However, in more recent filings made with the OTC market, the new CEO of the company is now a man named Javier Romero. Business Insider attempted to call Romero, but the effort was laughably unproductive.
In response to the wackiness of Cynk’s valuation, on Friday the Securities and Exchange Commission temporarily suspended the trading of securities of Cynk until July 24th, 2014. In a public statement the SEC announced, “The Commission temporarily suspended trading in the securities of CYNK because of concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in CYNK’s common stock.”
The obvious suspicion of what happened is that Cynk is a massive pump and dump operation, where the price of Cynk’s stock was artificially driven up in order to spur investors to buy in the stock. Once the price was pushed to the desired amount by the heads of the operation, those who manipulated the stock will “dump” their original stake and bank the profits.
An alternative explanation is provided by Bloomberg’s Matt Levine, who argues that the scheme merely appeared to be a pump and dump.
“What is so pretty about this scheme is that it doesn’t rely on anyone being wrong. You never need to find an outside investor to say, “oh hey this nonexistent social network looks like a great buy at $600 million.” Instead you just need a few people to say, “wait this nonexistent social network seems terribly overvalued at $600 million and I am going to bet against it.” That’s … what they’re supposed to do, right? Short sellers are supposed to try to root out scams and bet against them. That’s good for price efficiency (it keeps down the valuation of scams) and it’s good for exposing scams (short sellers have every incentive to expose frauds to the government to drive down the price of the frauds and make money for themselves).”
Basically, Levine is saying that this wasn’t a pump and dump at all, rather, it was to give the appearance of a pump and dump but actually produce a short squeeze.
It is undetermined how long it will take to actually understand what happened with Cynk. While the SEC has begun its investigation of the market anomaly, it could take months before the financial world finds out the truth behind the mysterious company.