Chronology of Controversial Practices in a Microcap Company

Abstract

Microcap companies are thinly capitalized issues that are typically not qualified for listing in national exchanges. They are also referred to as penny stocks. A typical microcap issue has very few market makers. Moreover, trading in OTCBB and Pink Sheets is often sporadic and erratic. Thin trading of a stock ensures that a few market makers can easily control the market. The absence of rigorous listing requirements as well as the high possibility of price manipulation makes microcap issues easy targets for fraudulent activity. In this article, the author examines an obscure microcap, Ziasun Technologies Inc., whose practices are very controversial. At the time of this writing, the company has not officially been charged by the SEC for violating any securities laws. Although no attempts have been made to prove their activities as illegal in an official capacity, their practices are at best disingenuous to the general public. Any company engaging in these activities should raise red flags for prudent investors. An examination of their practices reveals many of the common activities that result in fraud. James J. Cramer, a hedge fund manager and co-founder of TheStreet.com, said “penny stocks are a joke, often a fraud, and a huge mistake to own.” The case of Ziasun Technologies offers great insight into the operations of these companies.