I don't know about common, but its a thing - likely because of the "preferred shares" class.

This guy doesn't seem too big on reading the fine print: invests in Penny stocks and doesn't realize risk? Invests $100k without finding out details? Doesn't know what preferred shares are? Figured 1:1000 (public deal) and 1:30 / 3:1 (his deal) was exactly the same?

This lock-out period is something you can subscribe for voluntarily. It is mostly done for company founders whose company goes to the stock exchange; you don't want them to immediately sell all their shares because they would flood the market. In this case the author got a better deal for the conversion of his shares, for which he was apparently willing to lock up his position.

That's why I don't understand the author's surprise that the stock price was moving after the reverse split. Of course there were other parties which didn't sign such a deal.

  DiIorio recalls it peaking at $3.50 by September 2006, giving his holdings a value of around $1.3 million.
  the stock plummeted from $3.50 to $0.06 a share within two months.

So by the end of part 1, he's down to $22k.