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Saturday, July 13, 2024 | Back issues
Courthouse News Service Courthouse News Service

SEC Puts the Squeeze on Spongetech

BROOKLYN (CN) - Spongetech Delivery Systems dumped 2.5 billion shares on the market in a pump-and-dump scheme, then obstructed an SEC investigation with phony sales documents, the SEC claims in Federal Court. The U.S. Attorney's Office is pursuing "a parallel criminal action," the SEC said.

The SEC also sued a Spongtech affiliate, Spongetech CEO Michael Metter, CFO Steven Moskowitz, two former Spongetech attorneys and a stock promoter.

"This case involves a scheme to increase demand illegally for, and profit from, the unregistered sale of publicly traded stock in Defendant Spongetech Delivery Systems Inc. ... a company that sells soap-filled sponges," the complaint states. "Defendants Michael Metter ('Metter'), Steven Moskowitz ('Moskowitz'), and Spongetech accomplished this by, among other things, pumping up demand for Spongetech stock through false public statements about nonexistent Spongetech customers, bogus sales orders, and phony revenue. The purpose of flooding the market with false public information was to fraudulently inflate the price for Spongetech shares, so Metter, Moskowitz, and Spongetech could then dump the shares by illegally selling them to the public through affiliated entities in unregistered transactions."

The SEC also sued New York-licensed attorneys Jack Halperin and Joel Pensley, and stock promoter George Speranza, "a self-employed consultant associated with Spongetech who operated the Internet stock hype site 'nohypenobull.com.' Speranza is believed to reside in Brooklyn, New York."

In announcing the lawsuit, the SEC said in a statement that the defendants ran their pump-and-dump scheme "after several years of relatively little business with a single customer comprising the bulk of Spongetech's limited sales."

"The press releases fraudulently exaggerated the demand for pre-soaped sponges by [referring to] 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 wants assets frozen, an injunction and penalties.

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