Business & Economy -
A company called Cynk Technology reached a $6 billion valuation in July despite having no assets or revenue.
Shares of Cynk Technology closed July 25 at $2.10, a decline of 85%, after an SEC-imposed trading halt expired. Shares of the company are trading on the so-called over-the-counter grey market, whereby brokers are allowed to execute trades at the behest of investors but cannot solicit orders themselves.
Cynk is now valued at around $612 million, down from its high of around $6 billion earlier in July. Around 469,000 shares changed hands July 25. 386,000 shares were traded July 10, the day before the SEC temporarily halted trading because of "concerns regarding the accuracy and adequacy of information in the marketplace."
Cynk soared in value over the past few months, with its stock price going from 6 cents per share in May to nearly $22 on July 10, giving the company a market value of around $6 billion. Zero Hedge, a business news website, first reported on the company's dramatic rise on July 7.
Cynk was founded in May 2008 with the goal of creating a social network where users would pay to connect to other users. The social network, as described in a January 2012 SEC filing, was to be called Introbuzz, though its website is now Introbiz.com.
Introbiz claims to be able to offer users the ability to purchase the contact information of influential people across a variety of sectors, including business, entertainment, and politics.
The company's most recent financial statements, released in November 2013, showed a net loss of $1.5 million in the first nine months of the year. One person, Marlon Sanchez, was listed as the company's President, CEO, and CFO, though documents released in June show that he was replaced by a man named Javier Romero in Belize.
"I worked my magic for a year, my friend, and now you can see the results." Marlon Sanchez, former Cynk Technology CEO
The Wall Street Journal reported in August that the SEC, as part of a wider investigation into penny stock fraud, was focusing on whether or not one of Cynk's auditors, Peter Messineo, a 53-year-old accountant from Florida, had adequately examined the company's books. Messineo claimed to be a "bystander" in the incident.
One beneficiary of Cynk's rise was Matthew Fromm, a 27-year-old broker who bought 2,500 shares in 2013 for 10 cents each. He sold the shares for $20 apiece on July 10, earning him $50,000. Fromm told Bloomberg Businessweek July 24 that, if regulators were paying attention, he "should have never got a chance" to sell for $20.
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