It depends on who would take issue. A debt holder could sue the company for the “distribution” ...but in the penny world the “debt holders” are holding convertible securities and probably don’t care...or hope the company pumps the stock in this way so they can sell.
So generally nobody minds at all how ridiculous it is...the stock gets pumped.
The risk they run is an SEC suspension...I have seen a few because of “buyback” narratives that were pushed a little too hard. And if the company actually did buy some stock and are using that fact to pump the stock when no meaningful buyback is actually planned...could get their wings clipped.
Market Data 
Markets 
AI
