Why rob banks when you can sell penny stocks?

A Scam In Plain Sight

I don't know about you, but with the fresh new breeze blowing through Ms. Shapiro's SEC I can sleep better at night knowing that our tireless government watchdogs are busy protecting the public from con artists stealing tens of millions of dollars in penny stock scams.

Or not.

Spongetech is a crappy little OTC-BB company that has hired every stock promoter known to man (or woman) to hype its unlikely path to shareholder wealth-soap loaded sponges to wash your car, your pet, and your kid. While they have spent a fair amount of money advertising the product in unlikely venues such as baseball games, they have spent far more hiring an army of touts to spam and message board carpet-bomb the hype. IHub, scam promoter for the world, is front and center in the lineup of unisclosed paid shills despite the criminal indictment and arrest of its founder, Matt Brown, for just such manipulation.

Well, the SEC is busy with Madoff and Stanford, so maybe they overlooked this one, eh?

Or maybe they are the same torpid bureaucrats who were nurtured under Commissioner Cox.

The SEC has had in their possession since mid-May of this year the following damning documents related to Spongetech:

1. A letter from an attorney claiming that his name had been fraudlently forged on scores of opinion letters avowing that Spongetech shares were free of restrictions and could be traded on the open market. In said letter the attorney also describes what any reasonable person would interpret as an attempt by Spongetech's CEO to bribe him.
2. A letter from an attorney representing the company's former transfer agent, Old Monmouth, stating that they had relied upon opinion letters that were later found to be forged.
3. A letter from a mythical New York law firm used to create "legal opinions" as to the lack of restrictions on shares.

In addition, the SEC has received documentation of a massive dilution of unregistered shares sold into the market in direct contradiction of company claims in its most recent SEC filings.

Despite having this documentation of blatant fraud for three months, your fearless regulators have taken no action, and during those three months over a billion unregistered shares of the company have been sold to the public at prices ranging from a dime to close to thirty cents. Do the math.

What is it those SEC folks do all day?

CC

oig@sec.gov; calamaria@sec.gov;grossg@sec.gov

Why rob banks when you can sell penny stocks?

Dead Fish on a Silver Platter

Being a public spirited citizen I am passing on a deep insight that should make the SEC's job of policing markets easier for them: go to InvestorsHub.com; read the "top ten" stocks being discussed; they are all odds-on scams.

Number one in the listing for several months has been Spongetech (OTCBB SPNG), a cash poor penny stock that claims to be selling tens of millions of dollars worth of soap impregnated sponges, and whose fanatical message board following believe will soon be a billion dollar company.

I will not belabor the company's dubious financial figures, its gagged transfer agent, or the fact that over 90% of its claimed sales are to companies of questionable existence.

Why go to all that hard work when there is clear and convincing evidence that the company has forged an attorney's signature on opinion letters opening new stock to free trading status, constructed a fictional New York City law firm for yet other opinion letters, and gotten dumped by their former transfer agent because of these actions.

The SEC would be on this one like a duck on a junebug if they only knew, right?

Wrong.

The SEC has had hard documentation of these facts in their possession since May 15, 2009, since which time clueless investors have lapped up BILLIONS of questionably registered shares at prices ranging from ten to twenty cents per share. Not Madoff level, but not chump change either.

Some stock fraud cases are tough to make. This is a slam dunk that a Summer intern could handle.

But from the Federales?

Crickets.

UPDATE-We now have hard confirmation that Spongtech, despite claims of a share buyback, has outstanding shares in excess of 2.2 billion, several hundred million of them newly minted in June and distributed to insiders and promoters.


cc: SECOIG