Spongetech Delivery Systems Inc (fka SPNGQ)

[BMK]

Not understanding the logic in that comment, so for clarity:

Restricted shares are restricted until a time or event changes the status to unrestricted and able to be traded on the open market. Normally used as incentives for executives to achieve company goals or maintain shares a duration of time to help increase PPS while restricted. This was not the case in the SPNG case, but instead used to sell, for all intents and purposes, restricted shares after driving up PPS via false financial reporting.

These shares, however, are still authorized. We can, and do, agree that SPNG mgmt etal sold restricted shares on the open market via fake opinion letters. These shares are real authorized shares with the fraud being the opinion letters.

When shorting, shares get sold into the open market but do not exist and is why covering is required, to maintain the true balance of issued and outstanding shares, and NEVER greater than the authorized shares of a company. Mgmt fraudulently sold restricted shares into the market, but it would not have increased authorized figure and do not require delivery since they have been delivered, albeit fraudulently. FTD's, on the other hand, are not authorized and is the reason if OBO + NOBO > A/S, there has been short selling without the required covering.

@alien42: The 50B shares mentioned by Trustee was a figure he never should have mentioned in court if there is any sort of illegal/counterfeit shares in the open market, especially if trying to dispose of the case in unusually short order to prevent covering of short positions, the proverbial "short squeeze." That figure has been brought up several times in the BK case and judge is now asking how this benefits estate/shareholders. It appears that is shareholders burden, to prove benefit to estate, which does not seem terribly difficult given the fact counterfeit shares dilute the PPS, thereby harming the estate almost infintely due to shares require covering at whatever PPS the market bears. If real shareholdres understand this, they can, technically, hold out until PPS rises to unheard of levels. See VW case and German government shutdown of trading until everything sorted out.


Again, no dog in this fight, so only laying out all possibilities for comment. Another case similar in fraudulent nature and subsequent short selling is CMKX, the diamond mining company. Below is excerpt from the case, quoting then SEC Commissioner Paul S. Atkins, speaking of NSS (link provided):

"SEC COMMISSIONER PAUL S. ATKINS ADMITS THE SIZE OF
THE FRAUD IN THE OTC MARKET ALONE IS SO LARGE IT
COULD CAUSE A MASSIVE MELT DOWN OF THE MARKETS IF
THEY FOLLOWED THE LAW"

http://cmkx.info/CMKM-BRIEF-HISTORY-OF-SEC-CORRUPTION-2010-06-08.pdf

Does all this indicate SPNG has a short selling problem? Absolutely not, only that it appears from court transcripts that judge is willing to hear arguments for the case of short selling in the SPNG BK case.