A Wall Street trader said Cynk Technology's 36,000% 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 $6bn.
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. Cynk has said it’s a social-network service with no revenue and one employee.
'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'.
Instead of falling, the price more than doubled the next day, July 9, starting the squeeze. Market-makers who had sold the shares short got nervous and scrambled to buy them to close their positions, driving the price even higher, Laresca said. 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.
'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?'.
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