A Wall Street trader said Cynk Technology Corp.’s (CYNK) 36,000 percent 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 $6 billion. Tom Laresca, a market-maker at Buckman Buckman & Reid Inc., said he was among traders who thought they spotted a scam as the shares jumped to $2.25 last month from pennies. 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 share price more than doubled the next day, July 9, starting the squeeze. Market-makers who had sold the stock short got nervous and scrambled to buy stock to close their positions, driving it 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?” Laresca said that his firm cut off his ability to hold positions after the Cynk fiasco and that he plans to resign today.