"Notice how it is never mentioned that it started
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- ThePennyGuru
That's how these scams work. Controlling interest in a shell is purchased (63% for $80,000 in PTOI's case), the float shares are kept very low and the stock is pumped with fabricated news. It doesn't take much to get liftoff with few shares trading. Once the liftoff excites investors and the company keeps putting out baseless news, it's time for the swindler to sell shares through PIPEs and onto the market. That initial thin float becomes a fat float at higher prices as the swindler gets shares into the hands of investors in exchange for as much cash as he can get.
The swindler who has the controlling interest also has full control over how invested money is spent so he pays himself for services, salary, expenses, etc.... Investors will never know how much Mr. Bordynuik really paid himself. The only paper trails show a measly $2 million.
Once investors start seeing that the penny stock operator is a swindler and that not everything is right with the grandiose claims, the air gets let out of the tires.
To summarize: $0.05 to $7, thin float, fake claims, investors still trust and pile into the stock in droves. Once as many bagholders as possible are recruited, the swinder's role is done. He takes the money and leaves and could care less what happens to the happy bagholders. Over time the worthless company shrinks and evaporates. At that point, even if victims figure out what happened and sue the company, they will see that the coffers are empty and they're out of luck. The swindler is off spending their money. The company is then left to 'rest' for a few years until any lawsuits ghost away and then it's a reverse split, add more shares and swindle a new batch of investors.
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