Feds Charge SpongeTech CEO with Obstruction of Justice in Pump and Dump Stock Investigation
|May 6th, 2010||
|Contributed by: Teri Buhl|
|Looks like our local penny stock scammer is in a world of trouble because it’s not just the SEC who’s charged him for securities fraud today but he’s also facing criminal charges. Michael Metter, Greenwich radio station president and CEO of Spongetech was arrested in his Greenwich home this morning by the FBI and IRS for obstruction of justice. The U.S. Attorney says Metter’s partner Steven Moskowitz was also arrested for conspiring to commit securities fraud and faking at least five customers in an effort to cover-up what the SEC was investigating.|
But the executives of SpongeTech, who were already facing a civil class action lawsuit by investors who lost money in their alleged pump and dump scheme, are not the only ones the Feds are targeting. Both the SEC and U.S. Attorney complaint list unnamed ‘others’ as being involved in the illegal stock scam. According to people who have worked with the SEC and the FBI as informers in their case, there is also a continued investigation going on into the marketers and stock promoters of SpongeTech and its related party deals.
It’s a move that hopefully shows the SEC, and their partners at the Department of Justice, are drawing a hard line on not only the companies that try to mislead investors but also the outside stock marketers who knowingly release false press statements that materially affect the price of a stock. When asked what the charges will be against the stock marketers Robert Nardoza of the U.S. Attorney’s Office said, “No Comment”. Sources say one of the stock marketers and corporate communicators being investigated in this scam is Great Neck-based Corporate Evolution. SPNG, the ticker for SpongeTech, is currently promoted on Corporate Evolutions website. When a call was made for comment no one answered the phone at Corporate Evolution’s Long Island office.
The Brooklyn office of the U.S. Attorney complaint states that: “beginning in or about early September 2009, the SEC’s Enforcement Division issued subpoenas to various entities and individuals, including Metter and Moskowitz, as part of its investigation of Spongetech. Since then, Metter and Moskowitz allegedly obstructed the SEC’s investigation by fraudulently attempting to fabricate the existence of the five purported customers by (1) seeking to create Internet websites and virtual offices for the customers, (2) furnishing phony purchase orders purportedly issued by the customers, and (3) producing documents they falsely claimed were proof of payments by the non-existent customers.”
This February I reported, at the Greenwich Time, that Michael Metter made false statements during our interview about current sales activity in SpongeTech. Metter had gone on the record to say that Sponge had just landed a national sales order with Walmart for their kids sponge bath product. A Walmart spokesperson latter confirmed that no national order was in their system but only a regional order was made. The DOJ complaint says SpongeTech executives and others grossly overstated sales orders in public filing from January 2007 to May 2010.
Both the SEC and DOJ filed charges today but only the DOJ has the power to arrest. In past cases like this, the DOJ criminal case is allowed to proceed first with the SEC left sitting on its hands. But according to people involved in the present cases, the SEC could be leading the trial this time. The SpongeTech executives will be faced with defending themselves against Rick Simpson, the SEC’s lead trial counsel. Simpson is best known for his 1980’s IPO scam case against ‘Crazy Eddie’ Antar that earned Eddie jail time.
Metter has continually denied the SEC’s allegations and even threatened journalist (including me) for false reporting on his companies’ alleged investor abuse, via a civil lawsuit filed two weeks ago. News of problems at SpongeTech was first reported by Kaja Whitehouse at the New York Post in the fall of 2009, after she saw famed penny stock investor Tim Sykes question the company’s sale [corrected - Ed]. An in-depth investigative report explaining how Metter set up his stock scam was latter published by Greenwich-based investigative reporter Roddy Boyd for The Big Money. Metter and Moskowitz are being arraigned this afternoon and the U.S. Attorney’s Office boasts that they will aggressively pursue all involved in creating the fraud.
“The defendants in this case — Spongetech’s highest corporate officers — are charged with executing a bold scheme to portray Spongetech as a company that was performing at a levelfar above reality,” stated United States Attorney Lynch. “As detailed in the complaint, the audacity of their scheme was matched only by their obstructive efforts during the course of the SEC’s investigation. This Office will use all available resources to protect investors from fraud.”
Related Article Tags: Hedge Fund Fraud and Ponzi Scheme News; Hedge Fund Resources and Featured Partner News
More Recent Headlines
Hall of Fraud Top 10
Madoff Investments LLC
Stanford Financial Group
Petters Group Worldwide
Frankel International & Frankel Chemical
Satyam Computer Services
Capitol Investments USA, Inc
Westgate Capital Management, LLC
WG Trading Co
*Estimate of alleged Fraud/Investor Losses ($MM)