Spongetech Delivery Systems, Inc. (fka SPNGQ)

[GeeMoneyDollar]

Good read... Robert Shapiro...

http://www.sec.gov/rules/proposed/s72303/sonecon010504.txt


"(A)t times, the amount of fails to deliver may be greater than the total
public float. In effect, the naked short seller unilaterally converts a
securities contract (which should settle in three days after the trade date)
into an undated futures-type contract, which the buyer might not have agreed
to or that would have been priced differently."[2]

When the number of uncovered short sales in a stock exceeds its public float-or
even the total number of shares issued or outstanding--the only plausible
explanation is a concerted and illegal effort by short sellers to flood the
marketplace with counterfeit or fictitious shares, in order to artificially
drive down the stock's price and increase the value of the shorts. Massive
naked short sales turn the equity market into a form of monopoly pricing for
the firms that fall victim to such sales, in which the short seller sets the
price at a level guaranteed to provide a quasi-monopoly return. These actions,
in effect, destroy the integrity of the market system for firms targeted by
naked short sellers and create a direct transfer of wealth from existing
shareholders to the illegal short sellers. The firms targeted for such
manipulation are generally smaller, younger public firms - the type of
company which has generated many of the techno logical and organizational
innovations that have contributed so much to the increases in business
investment and productivity of recent years. As relatively small and young
companies with much fewer shares in their public floats than their older and
larger counterparts, their individual decline or destruction also generally
attracts little public attention.

These illegal short sellers cannot achieve pricing power over a firm by
themselves, since it involves creating hundreds of thousands or even millions
of phantom or non-existent shares in direct breach of numerous regulations
and laws. This undertaking requires the collaboration of broker-dealers who
will carry out short sales without transferring actual shares, and the tacit
countenance of the market organizations and regulatory bodies charged with
clearing and settling those short sales. The fact that naked short sales
occur on this scale, therefore, points to serious problems involving
compliance with short sale regulation at the investment firms conducting
these transactions for their customers. It also points to troubling problems
involving the enforcement of these rules at the NSCC , where these transactions
are supposed to be cleared and settled in accordance with the rules, at the
NSCC's corporate parent, the DTCC, and at the SEC offices entrusted with
overseeing the DTCC, the NSCC and investment firms.