They worked this time; you added an "e" at the end of Scanadu when you first posted them.
They may be investigating illegal shorting practices, as U.S. moneymakers are not allowed to short OTC stocks.
No, they are not. And market makers are indeed allowed to short OTC stocks naked to provide liquidity and meet demand.
What the SEC is investigating is very simple; it was an easy call for them. In the 8-K the company filed on 28 February to announce the reverse merger with Entertainment Art, it said:
As of immediately prior to the Acquisition, we were deemed a “blank check” shell.
Upon completing the Acquisition on February 28, 2013, we ceased being considered a “shell” company...
Whoever wrote that couldn't have been more wrong. Once a blank check company declares itself operational, it will still be considered a shell for the purposes of Rule 144 for an additional year. During that time, Rule 144 will NOT be available to anyone seeking to free up and sell restricted stock into the market.
And yet that was happening, on a fairly grand scale. There is no excuse for it, on the part of the company or the lawyers who wrote the opinion letters, or the people who solicited the opinion letters.
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