New York – Executives Accused in Alleged Stock Fraud Scheme

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    Spongetech's chief executive and president, and Steven MoskowitzNew York – The top executives of Spongetech Delivery Systems Inc. were arrested and charged Wednesday in an alleged scheme to defraud investors by reporting falsely and grossly overstated sales figures.

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    According to a criminal complaint filed Wednesday, Michael Metter, Spongetech’s chief executive and president, and Steven Moskowitz, the cleaning-products maker’s chief operating officer and chief financial officer, were charged with conspiracy to commit securities fraud and obstruction of justice. They each face up to five years in prison on the conspiracy charge.

    Metter, 58 years old, of Greenwich, Conn., and Moskowitz, 45, of Flushing, N.Y., are expected to appear before a U.S. magistrate judge in federal court in Brooklyn later Wednesday.

    “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 level far above reality,” U.S. Attorney Loretta Lynch said in a statement. “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.”

    The U.S. Securities and Exchange Commission also has filed civil charges in the matter, Lynch said.

    In the complaint, prosecutors from the U.S. Attorney’s office in Brooklyn alleged Metter and Moskowitz between January 2007 and May 2010 publicly reported the company had secured purchase orders or made sales to five customers that did not exist.

    For the nine months ended Feb. 28, 2009, the purported sales to those five customers accounted for as much as 99% of Spongetech’s revenue, prosecutors said.

    During that time frame, the men allegedly filed multiple false reports with the U.S. Securities and Exchange Commission and issued numerous press releases touting the false sales figures, typically via the Internet, prosecutors said in the complaint.

    Since the SEC issued subpoenas in September as part of a formal probe of Spongetech, Metter and Moskowitz allegedly have tried to fabricate the existence of the five purported customers, according to the complaint.

    They allegedly sought to create Web sites and virtual offices for the companies, have furnished investigators with phony purchase orders and produced “questionable documentation” purportedly constituting proof of payments by the customers, prosecutors said in the complaint.

    The SEC suspended trading of the company’s stock Oct. 5, according to the complaint. The suspension expired Oct. 16, and Spongetech has been trading only in the “grey market,” a market for securities not listed on any stock exchange, the Over-the-Counter Bulletin Board or the pink sheets, according to the complaint.

    A phone call to Spongetech wasn’t immediately returned Wednesday.

    An automated message on the company’s investor relations phone line said the company would make no comment during the SEC investigation and would only make public comments via press releases.

    A complaint is merely a charge and the defendants are presumed innocent until proven guilty.


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    110 Comments
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    Anonymous
    Anonymous
    13 years ago

    lyda lyda once again .

    MazelKGH
    MazelKGH
    13 years ago

    Not true.

    Bushah
    Bushah
    13 years ago

    People still don’t get it. It’s just not worth it.

    Anonymous
    Anonymous
    13 years ago

    Amazing SMR live and this crooks will get over with 5 years

    bh
    bh
    13 years ago

    Bh I cashed out all my shares without a loss ontime

    yentel
    yentel
    13 years ago

    The govt is getting more and more anti semitic. When will these attacks stop!! Oy! Hashem yerachem!!

    Anonymous
    Anonymous
    13 years ago

    What will it take to make these ehrlich yidden realize they cannot continue to act like Madoff, SMR, Dwek, the Spinka rav, the NJ rabbonim or any of the others who have been found guilty of–or alleged to have–committed felonies, tax evasion and other crimes. Maybe it will be a few more threats of life sentences to get the message across that yiddin are not exempt from secular law.

    dondiam
    dondiam
    13 years ago

    i have stocks there what now

    Oh, boy
    Oh, boy
    13 years ago

    Half of KGH will need to look for new jobs.

    tedtaub
    tedtaub
    13 years ago

    see him all the time this is kiiling me nicest guy around pleasse dont let it be true

    Anonymous
    Anonymous
    13 years ago

    What’s KGH? Dondiam – so do I…… A lot of yiddeshe gelt lost….. Hashem yimale chisroncha.

    Cholov Yishmoel
    Cholov Yishmoel
    13 years ago

    It is amazing that judaism and ‘kosher’ is defined by what people wear on the outside, but they can steal, lie, cheat, abuse, etc and still be considered a ‘religious’ person. It does not just trickle down but pours down from the top to the bottom. When you have 33 concert ban ‘rabbis’ who spew forth lies, and people see that being a ‘jew’ is a joke, than there is no hope. It is time to rip out the cancer starting from the top. It is time to oust these ‘rabbis and ‘jews’ from their positions. They are the real ones who are not just at risk.. they are the risk. Stop being blind and being led by the Blind!

    Anonymous
    Anonymous
    13 years ago

    kgh?

    Enough Said
    Enough Said
    13 years ago

    As long as rabanim don’t lose money with these pigs nothing will change. Some of these people deserve this anyway. When people start believeing in g-d which is a better investment then humans maybe this will stop. People who give million of dollars to some human being who promises more than a bank and a stock market are just plain stupid and we should not feel bad for these fools.

    Anonymous
    Anonymous
    13 years ago

    kew gardens hills queens

    Anonymous
    Anonymous
    13 years ago

    kgh = kew gardens hills (neighborhood in queens)

    embarrassed
    embarrassed
    13 years ago

    Moskowitz is a “frum” (or as frum as a person can be when committing such crimes) guy who was kind enough to hire many other frum guys, particularly 28+ year old guys who live in Kew Gardens Hills. Now his fortune is gone, he’s ruined the parnasa of countless investors and employees, caused another horrible chilul hashem and sullied the reputation of the Jewish people again. Everyone knew the shoe would drop eventually but the sheer chutzpah with which they operated is appalling. It was pretty obvious to the casual observer that things weren’t being run k’das uk’din there and that’s how the stock skyrocketed…and then plummeted within a month last June. Good for those who cashed in before the stock crashed but not so good for the lives these twisted individuals have ruined. They should get the full five year jail sentence for this one.

    old time observer
    old time observer
    13 years ago

    In which shul was he a member? Did the local Rabonim back him? Was he a big contributor locally?

    Shaul in Monsey
    Shaul in Monsey
    13 years ago

    Was this a pump and dump or a gypsy swap?

    Anonymous
    Anonymous
    13 years ago

    i lost with this basterd 10 k my friend who recmended me lost 500k he got those good news in mikve

    seankonnery
    seankonnery
    13 years ago

    I lost $2000 w/ SPNG because of the PR’s, hype, etc.

    mashen
    mashen
    13 years ago

    1. Let’s not be so quick to judge.

    Anonymous
    Anonymous
    13 years ago

    hopefully spng can be taken over by somebody and build up the company. Let’s face it, they are in Wal mart and other places.

    hedgie
    hedgie
    13 years ago

    SPNG is a zero. If anyone was sophisticated enough to read their financial reports there were related party transactions and many problems with cash flows adn receivable. Their 10k was one big red flag. This was a simple pump and dump. The problem for Moskowitz is that this became a very large pump and dump with all the advertising at sports stadiums. This guy gave out tickets to his suites at Citi Field so everyone thought he was some sort of genius. He was far from it. Do you know how many sponges you have to sell if you spend $400,000 a year advertising at each sports stadium. Most penny stocks are losers, and most mikva stocks are losers. Be very careful, and trust noone. Alot of money is lost because some rich guy owns the stock and people dont look into what the company is worth. I even warned people about this company and they buy the stock anyway. Really a shame when there are so many Tzedakas that need the community money, and so much gets wasted on garbage like Spongetech. There are also a good 15 or so guys who need a job right now, if anyone has any sales or other openings, should find away to contact those employees.

    mashen
    mashen
    13 years ago

    Reply to #42 .
    If KGH is so full of sketchy people, why don”t you move.

    a reader
    a reader
    13 years ago

    Everyone is a genius. If it was so obvious, why did it take so long to build a case. Let the man have his day in court. He has a family and your piling on him serves no purpose. The real tragedy is for the investors and employees who will suffer even if he is proven not guilty.

    Anonymous
    Anonymous
    13 years ago

    a really frum people do not still!!!

    lost $$$
    lost $$$
    13 years ago

    My friends, family and myself lost thousands of $$$ with spng.PK it just wasn’t worth the gamble.

    efsher1
    efsher1
    13 years ago

    is there any chance that spng will rebound?

    nofreelunch
    nofreelunch
    13 years ago

    @efsher1
    why would you even try and speculate? with a management that has and continues to disrespect its shareholders and employee’s, very shaky fundamentals, a product that seems to be filling an entirely non-existent gap in the market and the fact that there will be class action lawsuits coming like a Tennessee flood, you will be setting yourself up for one big disappointment!!

    Made a fortune!!!
    Made a fortune!!!
    13 years ago

    Actually, I bought at a low – got a phonecall from someone to get ready to bail – met him in the mikva when he told me – do it now – do it today – do it even if you have to break Shabbos (I didn’t) and I left to home called my broker (who tried to convince me to stay in, as they do because they are always thinking only about themselves) and I made $394,000 after tax. I am willing to give $94,000 to help those few families mentioned who are now out of jobs. Can someone contact me with a way I can obtain their details please!

    hedgie
    hedgie
    13 years ago

    Considering that Spongetech has huge liabilities from lawsuits, including class action, and perhaps 25 sports teams, not to mention that all they do is sell sponges, and not that many of them, the chances are extremely thin that this ever trades above a penny. But since stocks are supply and demand, hard to say 100%, but obviously the company is worthless.

    jimmy37
    jimmy37
    13 years ago

    A ZZZZ Best wannabe. These are pikers, in comparison.

    Anonymous
    Anonymous
    13 years ago

    It’s pure loshon hara to say that many people in KGH are sketchy and definitely not true. Maybe a couple but to say loshon hara about a whole community is a tremendous aveirah.

    Anonymous
    Anonymous
    13 years ago

    I hope the very best for Mr. Moskowitz, he was a man who almost all the time said yes to everything. He’s a good man!!!!!

    Anonymous
    Anonymous
    13 years ago

    apparently im going to the wrong mikvas

    Anonymous
    Anonymous
    13 years ago

    Mr. Moskowitz is one of the most big hearted and generous people I know. I think we should wait and see what happens with the investigation before we are quick to judge. Is everyone perfect out there- how many people work for cash jobs and dont report their income to the IRS? some of the finest people do this and dont see anything wrong with it. I remember once I wanted to hire a kollel wife to work with my daughter on reading and she would only do it if i paid her cash on the side. It really disturbed me. We are all guilty of something when you take out a magnifying glass. Let’s pray for the best

    anonymous
    anonymous
    13 years ago

    its amazing how this guy thought he was going to get away with this,he should get 5 yrs just for being stupid

    Anonymous
    Anonymous
    13 years ago

    Does anyone realize that there was another person arrested as well?! Did anyone look into Michael Metter’s past history of Securities issues? Could it be that he was the one who was behind the alleged scheme? No question to me that Metter is behind the whole thing.

    KGHDEVASTATION
    KGHDEVASTATION
    13 years ago

    As someone who is personally affected by this situation and as someone who once respected Mr. Moskowitz tremendously it is my obligation to let all of klal Yisrael know that this man has a diagnosable illness. All of us trusted and believed in him. He lied to us again and again. For the last several weeks noone knew what to believe. Everyone in the office has large families. The rug has been swept from under all the Heimishe Spongetech and Vanity Events (his other company that is going down now too) Mr. Moskowitz has a lovely family. I dont know how they will be able to face anyone in the street. At first I felt bad for him, but after the stress that has now effected my family all of the rachmanus I felt is gone.
    A tremendous number of families in our community will suddenly be faced with devastation. I”m talking about nice, fine, erlicher families. If anyone out there is hiring, please post.

    Anonymous
    Anonymous
    13 years ago

    Made a fortune!!! Says he is willing to help but has not responded to any pleas
    are you for real?

    Anonymous
    Anonymous
    13 years ago

    Does anyone know what Mrs. Moskowitz has to say about all this. She is sitting pretty on the 100 million+ that he’s been stashing in the bank on all his trips to Switzerland. She wont have any problems buying her family food for Shabbos. If she had a heart she would make her husband take care of all the families he just destroyed.

    Anonymous
    Anonymous
    13 years ago

    Who was Spongetech’s Independent Auditors/ Accounting Firm?