Spongetech Delivery Systems, Inc. (fka SPNGQ)

[scion]

Defendants 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 (“Bomart”), which Moskowitz transmitted and caused to be transmitted to Spongetech’s transfer agents.

AMENDED COMPLAINT

Plaintiff, the United States Securities and Exchange Commission (“SEC” or “Commission”), alleges as follows:

SUMMARY

1. 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. (“Spongetech” or the “Company”), a company that sells soap-filled sponges. 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 non-existent 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.

2. Defendants Metter, Spongetech’s Chief Executive Officer and a former registered representative with a long disciplinary history, and Moskowitz, its Chief Operating Officer, control both Spongetech and Defendant RM Enterprises International, Inc. (“RM Enterprises”), Spongetech’s majority shareholder. RM Enterprises is one of the conduits through which Metter, Moskowitz, and Spongetech illegally distributed approximately 2.5 billion Spongetech shares at inflated prices.

3. Defendants Metter, Moskowitz, and Spongetech repeatedly and fraudulently exaggerated the demand for pre-soaped sponges by announcing in press releases and public filings that Spongetech had received tens of millions of dollars in orders for Spongetech products from five primary customers: SA Trading, US Asia Distribution Company or US Asia Trading (“US Asia”), Dubai Export Import Company (“Dubai”), Fesco Sales Corp. (“Fesco”), and New Century Media (“New Century”). Defendants Metter, Moskowitz, and Spongetech knowingly, or recklessly, issued materially false or misleading press releases and made materially false or misleading statements in Commission filings when they knew that these customers and their orders did not exist.

4. Defendant George Speranza (“Speranza”), a self-employed consultant associated with Spongetech, knowingly, or recklessly, participated in the fraud by, among other things, creating internet websites and virtual office space for the fictitious customers with which Spongetech claimed to be doing millions of dollars of business so that actual or prospective shareholders would believe the customers were legitimate.

5. Defendants Metter, Moskowitz, and Spongetech further advanced and concealed the fraud by causing the creation of false purchase orders, invoices, and bills of lading, purportedly documenting the fictitious orders received from, and sales to, non-existent customers.

6. Defendants Metter, Moskowitz, and Spongetech illegally distributed approximately 2.5 billion Spongetech shares in unregistered transactions through Defendant RM Enterprises and other affiliates, which acted as conduits for the Defendants to distribute restricted shares in unregistered transactions to the public.

7. As part of their scheme, Defendants Metter, Moskowitz, Spongetech, and RM Enterprises used false and baseless attorney opinion letters rendered by Defendants Joel Pensley (“Pensley”), who is subject to an anti-fraud injunction and who was the subject of an order pursuant to Rule 102(e) as a result of his role in another scheme to sell securities in unregistered transactions, and by Jack Halperin (“Halperin”) to distribute shares of Spongetech to the public. Defendants Pensley and Halperin knowingly, or recklessly or negligently, made false or misleading statements in their attorney opinion letters to Spongetech’s transfer agents who then improperly removed the restrictive legends from Spongetech shares. This allowed RM Enterprises and other affiliates to distribute the shares illegally in the public market in unregistered transactions. Defendants 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 (“Bomart”), which Moskowitz transmitted and caused to be transmitted to Spongetech’s transfer agents.

8. Defendants Metter, Moskowitz, and Spongetech also repeatedly and fraudulently understated the number of Spongetech’s outstanding shares in press releases and public filings. These Defendants knew, or were reckless in not knowing, that Spongetech actually had hundreds of millions more outstanding shares than they reported.

9. Defendants Metter, Moskowitz, and Spongetech spent portions of their illicit profits to advertise with professional sports teams and events to support their claims that Spongetech was prosperous, such as highly visible sponsorship deals with professional teams in Major League Baseball, the National Football League, the National Basketball Association, the National Hockey League, and the United States Tennis Association.

10. At the direction of Defendants Metter and Moskowitz, Spongetech made false and fraudulent periodic filings with the SEC that contained material misrepresentations about Spongetech’s orders, sales, and revenue derived from transactions with the fictitious customers and which understated the number of authorized and outstanding shares issued by Spongetech. Metter and Moskowitz signed and certified each of these filings as true and accurate when they knew, or were reckless in not knowing, that the filings contained materially false and misleading statements.
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Extract - more
Doc 219 PDF file
http://www.scribd.com/doc/209849203/SEC-v-Spongetech-Et-Al-Doc-219-Filed-30-Mar-12