UPDATE: Back in June 2009, I posted FACTS about the paid-for stock promotion and massive share dilution, labeling SPNG “a blatant pump & dump” HERE and HERE…just under one year later, the SEC has concluded the same thing and even gone much deeper…
FYI SpongeTech Delivery Systems Inc. (SPNG) is suing me (check out their whole legal filing…I have yet to be served) since they accuse me of concocting a “stock market manipulation scheme” along with Kaja Whitehouse of The NY Post…
As I posted earlier, I have NEVER talked with Kaja Whitehouse and in fact, our only communication was me asking why she didn’t contact me before her articles were published!
The big question is why would I “short and distort” when SpongeTech’s own SEC filings had so much dirt in them, all I did was quote their own filings and exposed promotional mailer upon mailer and how stock promoters were compensated millions of shares. Furthermore, why would I write over a dozen articles on SPNG if I only shorted the stock for one day back in June 2009, as I fully disclosed
The answer is because I am a trading teacher–SPNG was a perfect example of the kind of questionable company that had risen 1,500%+ by the time I had started writing about it/looking at it as a potential short.
I have 4 newsletters and 10 instructional DVD packages teaching people how not to be suckers when it comes to penny stocks like this….how you can spot paid promotional mailer runups a mile away and not just avoid them, but also profit from them legally and ethically, as TIMalert subscribers and PennyStocking Silver subscribers did with stocks like NXT Nutritionals Holdings Inc. (NXTH) (see our one trade on that stock) and Mesa Energy Holdings Inc. (MSEH) (we nailed that one too…and we didn’t have to cover so quickly on either as both stocks have dropped 80%+)…I didn’t do all the hardcore business research that it looks like The NY Post’s Kaja Whitehouse did, my focus was purely on the paid-for stock promotion and share dilution…which ALWAYS results in a longterm catastrophe for shareholders.
Anyway, now that the SEC has investigated and publicly shared these conclusions…oh yes, this is a massive investigation as the SEC lists in their complaint:
The SEC alleges that Spongetech CEO Michael Metter and another senior executive, Steven Moskowitz, hyped fictional customers and grossly exaggerated sales figures through dozens of bogus press releases and fraudulent SEC filings to pump up demand for stock in Spongetech, a company that sells soap-filled sponges. After flooding the market with the false information to fraudulently inflate the stock price, Metter, Moskowitz, and Spongetech dumped approximately 2.5 billion shares by illegally selling them to the public through affiliated entities in unregistered transactions. They spent portions of their illicit profits in highly visible sponsorship deals with professional sports teams to further create the aura that Spongetech was a well-known and prosperous business.
The SEC suspended trading in Spongetech stock on Oct. 5, 2009, due to questions about the accuracy of the company’s press releases and SEC filings. In today’s enforcement action, Spongetech is accused of obstructing the SEC’s investigation by producing phony sales documents in an attempt to legitimize the make-believe customers it hyped to the public. The U.S. Attorney’s Office for the Eastern District of New York today announced a parallel criminal action in the matter.
“Spongetech used a menu of manipulative strategies to perpetuate this scheme, including fake sales orders and public statements as well as obstruction of the SEC’s investigation,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “We will utilize all available means, including referral to criminal authorities, to prosecute those who attempt to thwart our investigations.”
Christopher Conte, Associate Director of the SEC’s Division of Enforcement, added, “Investors were deceived into believing that Spongetech was a successful business, while Spongetech and its senior executives were illegally dumping shares into the market.”
Two of Spongetech’s former attorneys — Jack Halperin and Joel Pensley — and stock promoter George Speranza are also charged in the SEC’s complaint, which was filed in U.S. District Court for the Eastern District of New York. RM Enterprises International Inc., an affiliate through which Spongetech dumped shares, is also charged.
According to the SEC’s complaint, after several years of relatively little business with a single customer comprising the bulk of Spongetech’s limited sales, Metter and Moskowitz began to paint a more promising and misleading picture of Spongetech’s business. Beginning in approximately April 2007, Spongetech issued dozens of phony press releases touting increasingly larger, yet fictitious, sales orders and revenue. The press releases fraudulently exaggerated the demand for pre-soaped sponges by referencing millions of dollars in sales orders, business, and revenue from five primary customers that purportedly accounted for 99 percent of Spongetech’s business, yet none of those customers actually existed.
The SEC’s complaint alleges that Metter, Moskowitz, Spongetech, and RM Enterprises used false and baseless attorney opinion letters by Pensley and Halperin to distribute shares of Spongetech to the public. Metter, Moskowitz, and Spongetech also used false and misleading attorney opinion letters — forged in Pensley’s name and in the name of a fictitious lawyer, David Bomart — which were transmitted to Spongetech’s transfer agents. The SEC further alleges that Speranza created websites and rented unoccupied office space for the fictional customers in an attempt to legitimize them.
The SEC thanks the U.S. Attorney’s Office for the Eastern District of New York, the Federal Bureau of Investigation, the Internal Revenue Service, and the Financial Industry Regulatory Authority for their assistance in this matter. The SEC’s investigation is continuing.
…so now I guess it’s okay for me to bring out the P&D terminology, making sure to use the word “allegedly” since SpongeTech executives Michael Metter & Steven Moskowitz deserve a fair trial.
There are two trials here—one in court and one in public opinion.
If what the SEC alleges is proven true and SPNG executives did sell 2.5 billion shares, this may go down as the largest penny stock pump and dump in history (the stock rose from under a penny/share to 30 cents/share so you gotta figure an average selling price of 10-20 cents/share would yield $250-$500 million in allegedly illegal profits)…pretty amazing considering SPNG is getting sued by half a dozen sports teams like The NY Mets, NY Islanders, Chicago Bears & NY Giants as The NY Post recently pointed out (nope, they didn’t ask me for my opinion, I am simply linking to a published article FYI) for mere six figures (where did all the money go from these 2.5 billion share sales?):
Earlier this month, the Chicago Bears Football Club sued SpongeTech for $260,000 in Cook County, Ill., Circuit Court for money it claimed was owed for advertising and “other promotional benefits.”
Also this month, the New York Islanders Hockey Club filed a lawsuit against the company in Nassau County Supreme Court for $405,000, alleging the company failed to pay for ads at the Nassau Veterans Memorial Coliseum.
Previous lawsuits include CBS Radio’s claim for $366,231; the New York Giants for $360,000; Madison Square Garden for $430,880; and the Mets’ Citi Field for $300,000 in bounced checks over display ads at the stadium.
Oh yes, SPNG did a massive amount of sports advertising as I posted HERE…ESPN even wrote an article “What The Heck’s SpongeTech” (which also got picked up by Sports Business Daily) & featured them prominently in articles like this
This company has sued The NY Post and me saying I was the one who shorted and distorted and caused their business harm (interesting that the SEC alleges the phony press releases started in April 2007, 2 years before I came to the scene) and I believe that’s a bold-faced lie and I think I can prove it.
So please do read my articles and SEC complaint below and vote in this poll as to whether or not SPNG is a “pump and dump scheme”…let’s see what the people think!
First NY Post article featuring my research
The 2 brothers my posts saved from believing the SPNG hype (and they pocketed hundreds of thousands of dollars)
SPNG sales video:
SPNG halted by SEC, the month I predicted 3 SEC halts
SPNG announcing SEC investigation
Hedgefund.net article about SPNG suing The NY Post and me and their followup of SPNG’s execs being arrested 2 weeks later
Posted in Scandals, Stock Promoters, Videos