But Spongetech Execs Aren’t Used to Handling Bar Soap…
“Spongetech’s masterminds are going to prison. File that under ‘unfinished business.'”
~ Gary Weiss, on Spongetech executives who were arrested yesterday for securities fraud and obstruction of justice.
Seems Hard to Believe That a Pre-Loaded Sponge Company Would Have to Resort to Fraud
Today in “they just made the numbers up” news, it’s shocking that a company with this business description:
We design, produce, market, and distribute cleaning products primarily for vehicular use utilizing patented technology relating to sponges containing hydrophilic, or liquid absorbing, foam polyurethane matrices and other technologies. Our products can be pre-loaded with detergents and waxes, which are absorbed in the core of the product then gradually released during use. We have designed and are conducting additional research and development for products and applications using hydrophilic technology and other technologies for kitchen and bath, health and beauty, auto, medial and pet use, which we intend to market and sell as part of our product offering. There is no assurance that we will successfully be able to market and sell products for kitchen and bath, health and beauty, auto, medial and/or pet use.
…would have to make up five customers out of thin air to account for 99% of their revenue:
According to the SEC’s complaint, after several years of relatively little business with a single customer comprising the bulk of Spongetech’s limited sales, Metter and Moskowitz began to paint a more promising and misleading picture of Spongetech’s business. Beginning in approximately April 2007, Spongetech issued dozens of phony press releases touting increasingly larger, yet fictitious, sales orders and revenue. The press releases fraudulently exaggerated the demand for pre-soaped sponges by referencing millions of dollars in sales orders, business, and revenue from five primary customers that purportedly accounted for 99 percent of Spongetech’s business, yet none of those customers actually existed.
Yes, they had an auditor. According to the the last 10-KSB filed it was Drakeford & Drakeford, LLC who has had their own share of trouble.
SEC Charges Spongetech and Senior Executives in Pump-and-Dump Scheme [SEC Press Release]
SEC v. Spongetech, et al. [SEC]