Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.
That was the case for CYNK - a friend of those that pulled off the scam - has most of the stock closely held by the insiders but my friend has a few million shares put aside for me as a private placement at $0.06 - the stock ran to $22.00 but I told my friend I didn't want to get involved. When it hot $20 it was on CNBC and in a few days the FINRA halted CYNK and the next day the SEC halted it.
Greed isn't good.
"A Wall Street trader said CYNK Technology Corp.’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 US$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 US$2.25 last month from pennies. He sold it short last week around US$6 — which means selling stock you don’t own with a plan to buy it cheaper soon, pocketing the difference.
That didn't work out very well since the insiders owned most of the stock it was a supply and demand issue with the insiders buying shares between them.
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