Spongetech Delivery Systems, Inc. (fka SPNGQ)

[Nikodemos]

Patchman, I have a SPNG question for you.

I originally took a position in SPNG in July, traded it and made money. Fine. However, while watching the L2 trades go around that time I couldn't help but notice that NITE was consistently on the ASK & hardly ever on the BID. At first I thought they may have purchased a ton of shares prior to my observations and explained it all away as such. Although as time marched on, I saw more of the same for months on end. The RegSHO lists and FTD's I saw later this past summer made me believe that NITE was responsible for them.

Fast forward to suspension-time whereby SPNG goes down & NITE goes up (check the charts). Fortunately, I bailed from SPNG around the time when the 10K was NOT produced. I later went and shorted NITE based upon what I saw just prior to the post-suspension open of SPNG assuming they were short a bunch (just my opinion is all).

Then, more recently, a Y! MB poster named thefitstar starts tracking ONE online retail shorting broker called IB (Interactive Brokers) on a daily basis & begins reporting what he sees (unfortunately his posts on the matter have been deleted and his account terminated-- some of his threads I included here were largely ignored).

Link to IB website:
http://www.interactivebrokers.com/en/trading/ViewShortableStocks.php?cntry=usa&tag=United%20States&ib_entity=llc&ln=&b=SNF&e=SPW
(scroll to SPNG, click "check availability)

Essentially, in this NITE "short account", thefitstar reports that each night from around 11:30pm-2:30am...the account dwindles from around 5.3 - 7.3 Million, down to as low as 500 - 850,000 shares available to short. Now, around 6am to 8:30am each morning the account is "restored & replenished", day-after-day, to around 5.3-7.3 Million share figure (pre-market). Calls put into the trading desk at IB reveal that this is unusual as their accounts adjust in REAL TIME (as shares are shorted, the account shares are decreased and covering elicits the inverse effect) to accommodate supply/demand.

Curious, I began to track this ONE account myself and see the exact same pattern day-after-day. What is very puzzling about this phenomena is the costs associated with shorting on this ONE account. They are as follows; $2.50 per share, plus share costs and commissions.

Who is shorting this daily volume of around 3-6Million? Considering this now 8week tight-trading-range of $.04-$.05, the aforementioned rather-large daily "short" volume, the difficulties of selling/buying (shorting/covering) in a profitable manner in this trading range, the risks & sizeable costs (which are prohibitive in my view under these conditions) all point to a highly unprofitable venture and therefore unlikely executed by any retail investors or consortium of same such. Furthermore, when I personally called IB to ask after this matter, they suggested that I contact the SEC...being highly atypical (according to Dan at the trading desk, as well as Jeff & Liz). So, thefitstar logically suggested that it was NITE (Knight Capital Group) that very well may be behind this trading action...as in WASHING trades. Who else has the motivation, access, and presumably the need to "cover" the shorts they amassed? If not them, then who?

I write all this because I understand you have developed a reputation for being an investor advocate (I have seen you on TV in that role), and I have read some of your published reports.

Am I missing something here with regards to these observations in particular? Moreover, this very narrow trading range, volume and whatnot seems highly irregular & bordering on manipulation with NITE at the helm here "matching trades" so to speak. Well, what do you say about all that I have written here?

Thanks in advance for you time and kind reply to my inquiries on the subject. I look forward to reading what you have to say.