The U.S. financial world has been gripped by the saga of Cynk Technology Corp., a mysterious Internet company whose value suddenly shot up to US$6 billion before it was shut down by security regulators on Friday. Canadians might also want to pay attention, given the company’s links to a B.C. businessman.
Cynk’s share price rose from pennies to more than $21 in little more than a month, even though the company had no revenue, a single employee and a head office in Belize. Its sole business, Introbiz.com, seemed to consist of a website that charged people to connect them with celebrity social media accounts. Investors and analysts quickly declared the social media company a scam, but that didn’t stop its share price from soaring before regulators suspended trading.
One veteran Wall Street trader told Bloomberg that he was fired after he shorted Cynk, only to see it shoot up in value.
In an interview with the Seattle Times, Cynk’s founder, John Kueber, said he started the company in 2008 and later sold it to a friend of his brother, Vancouver-area businessman Phil Kueber.
Phil Kueber is an officer of at least 10 companies registered in Nevada and has a long history of troubled financial dealing in Canada that ran him afoul of regulators in B.C.
Former Vancouver Sun columnist David Baines has chronicled several of Kueber’s alleged dealings in Canada and the U.S. In 2010, he wrote: “For more than two decades Kueber has stumbled from one bad promotion to another, mostly listed on the Pink Sheets, [a] U.S. over-the-counter market where almost anything goes.”
In 2005, B.C. regulators shut down Kueber’s Kelowna-based cash card company, BUX Cash Card Inc., alleging it wasn’t licensed to take deposits and had cashed cheques from a senior citizen in Beverly Hills, Calif., who had been scammed out of more than $12,000 in a fake lottery. Five years later, provincial regulators shut down another one of Kueber’s companies, Pepper Rock Resources, an energy firm trading on the lightly regulated over-the-counter markets in the U.S.
Just as Cynk’s value soared suddenly this month, back then Pepper Rock’s share price jumped up 7,600 per cent after the company was heavily touted by Internet-based stock promoters. Among Pepper Rock’s major shareholders were the wife and son of Scott Marshall, a well-known Vancouver stock promoter who had been the subject of an RCMP investigation. He fled the country after someone fired six shots into his palatial Vancouver mansion in 2007.
A 2010 SEC filing announcing Kueber had become Pepper Rock’s president and CEO described Kueber as a former writer for Global Television Network and film producer who graduated from the University of British Columbia and had “over 20 years experience in the entertainment, resource, and venture capital industry.”
In an email to the Seattle Times, Phil Kueber said he helped his brother sell Cynk to an acquaintance named Kenneth Carter in 2011. Its ownership appears to have traded hands several times since then. Kueber told the paper he “had very limited involvement with company operations since then, except to consult from time to time.”
So far U.S. regulators haven’t declared Cynk a scam, but the sudden rise and fall of the company’s share price has sparked renewed fears that a new tech bubble is forming in the stock market more than a decade after the first one burst. A company with no business, no employees and no revenue that is nonetheless worth billions on paper was the definition of the first dot-com bubble that burst in 2001. The Cynk saga may also help the ongoing movement to create a national securities regulator in Canada, since stronger regulatory oversight may keep speculators and fraudsters from getting their feet wet in Canada’s capital markets before moving on to bigger fish in in the U.S.