On Wednesday, the SEC charged Spongetech Delivery Systems Inc. and five executives with conducting a massive pump-and-dump scheme. The SEC has also charged two of the company’s former attorneys and an affiliate, RM Enterprises International Inc.
The SEC alleges that Spongetech CEO Michael Metter, and another senior executive named Steven Moskowitz flooded the market with false information about the company in order to pump up the demand for the company’s stock. Spongetech allegedly hyped fictional customers and grossly exaggerated sales figures through dozens of bogus press releases and fraudulent SEC filings. The SEC claims that 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.”
The SEC alleges that Metter and Moskowitz dumped 2.5 billion shares by illegally selling the shares to the public through affiliated entities.