I forget the exact number, but I think if a private company has >= 500 individual shareholders, that triggers an SEC requirement for public disclosures. So this kind of trading activity could force a company to, e.g. reveal that it's not yet profitable, or it's been astroturfing growth on it's current hot app.
It's not actually trading stock or adding shareholders. It's collateralizing the shares, much like you mortgage your home. They simply front you money with a lien against your shares.
