You'd be amazed what some of these types will do, even if they think the SEC is watching. Pretty big hedge funds are naked shorting their own PIPE financing clients every day, and only a handful ever get caught.
If they've gotten away with it up til now, why would they stop?
Nothing shocks me anymore, especially in the pennies, which is the wild west of the stock market.
This play is high risk/high reward. You do your DD, place your bet, and take your chances.