Spongetech Fraudster Moskowitz makes SEC Plea Deal

Nearly six months after Steven Moskowitz plead guilty of one criminal count in the Spongetech pump and dump stock scheme the Securities and Exchange Commission got him to settle their securities fraud suit. On May 30th court filings show Moskowitz, co-conspirator of one of the most audacious penny stock frauds that cheated thousands of regular Joe’s out of life savings, agreed to be permanently banned from the industry and payback any profits and bonus he earned while President of Spongetech.

The number of millions Moskowitz will be ordered in restitution is still to be determined by New York Federal Judge Irizarry. The government’s suit, filed in May 2010, claimed the company controlled by Moskowitz and Michael Metter made $52 million in ill-gotten gains. Moskowitz doesn’t admit or deny guilt in the regulators settlement but then the SEC throws in this special condition that he can’t publicly deny he didn’t do any of the securities violations, which included fraud, that they sued him for. This of course could be a boost for the shareholder class action civil suits that are moving forward in New York Federal Court but considering Moskowitz has plead poor to the courts since his arrest we still don’t know how in the heck the SEC is going collect their financial judgment. Remember Moskowitz’s partner and Greenwich Radio station owner Michael Metter is still fighting the DOJ and SEC fraud charges and has yet to admit any wrong doing. And court records don’t exactly show either men have double-digit millions sitting in banks accounts waiting to be seized.

Now we see even though the DOJ got 6 guilty pleas in the case they have a serious evidence problem in their case against the last holdout – Mr. Metter. Aaron Elstein of Crain’s New York reported last month the DOJ got slapped in the face by the judge in Metter’s case when she denied their ability to use any electronic info they got off seized personal computers of Metter because they took too damn long to get through discovery and show Metter’s attorney what they had. If this sounds like a rookie legal mistake let’s not forget this is the same DOJ office that lost the case against the Bear Stearns Hedge Fund managers. Maybe the DOJ found some hidden emails on Metter’s computer showing millions hidden in off-shore bank accounts in Israel (both men are Jewish) and can tell the SEC where to get their recovery from but that’s a long shot.

The SEC made some progress this spring in getting the assets of Biztalkradio.net, which owns the local Greenwich radio station and three other stations, added as a relief defending in their suit. Metter has been a partial owner and chairman of this legitimate business for years. But the SEC added on claims that the Spongetech duo used the Radio biz to embezzle money via Spongetech stock. So the regulator has forced Metter to sell the stations and if there is a buyer the profits go to the SEC. No decent offers have come in yet and it’s highly doubtful they’d get the $1mn asking price on the Greenwich station. On top of that, in February we saw an upstate New York secured lender, Solution Funding, magically pop up and claim if the stations sell they are owed a few million also so that asset isn’t likely to produced real dollars for aggrieved shareholders or the SEC.

Court records show Metter is still getting paid around $6,800 bi-weekly by the radio biz although the SEC controls how he can spend it. Since his May 2010 arrest two years ago that means he’s been able to earn a few hundred thousand dollars off a company that alleged was money laundering about $5 million for Spongetech and its affiliates. He also still gets to live in his $2 million mid-county Greenwich home but hey at least the SEC took his yacht away. The only ray of hope for shareholders is that a letter filed by the SEC in court says a receiver should be appointed soon for Biztalkradio.net and we can assume the receiver would oust Metter from his current $100k+ job and move the stations sell along.

A total of seven people from lawyers to men who helped move money around for Metter and Moskowitz were arrested in the Spongetech securities fraud case and 6 have them have now plead guilty to criminal charges (3 of the 6 have been sentenced to jail time). The Spongetech duo has been charged with fraud, conspiracy, obstruction of justice, money-laundering and perjury in the DOJ’s case but Moskowitz and Metter the masterminds behind the scheme are still not locked up. Remember this was company New York Post trained investigative reporters Roddy Boyd and Kaja Whitehouse warned was a fraud a year before there were any arrests. I even reported for Greenwich Time three months before his arrest that Metter could lose the radio station if the SEC charged him. Metter even tried to sue the three reporters outing his fraud for defamation before his arrest which was of course tossed out. The SEC can fine and ban Wall Street criminals all day long but when it happens so late after the financial crime has been committed collection efforts become that much harder and the legal impact that much softer.

SEC Gets Spongetech fraudster to pay $1.3 million

The SEC scored its first victory in their case against the penny stock scam at Spongetech. Last spring Greenwich radio station owner (WGCH) Michael Metter and his pal from Queens, Steven Moskowitz, were arrested at their homes by the FBI for interfering in a SEC investigation and slew of investor fraud claims. The SEC sued a long time friend of Moskowitz last month, Myron Weiner, for selling unregistered shares of Spongetech and basically laundering the cash for Moskowitz and Metter. Well it looks like Weiner folded pretty fast because yesterday the SEC said he agreed to pay a hefty fine of $1.3 million. Weiner’s civil penalty was only $50,000 and he doesn’t have to admit to wrong doing.

The SEC says Weiner lives in Hoboken, owns a restaurant in New York City, is 69, and had this little problem with manipulating the price of certain stock back in the early 70’s. The complaint goes on to claim Moskowitz and Weiner met in 1970 while working at Kenneth Bove (the firm where the stock manipulation went down so many years ago). Weiner became a shareholder of RM Enterprises, the firm Metter and Moskowitz allegedly used to funnel Spongetech stock sales through, when he was gifted shares in 2001. Then in 2009 he got a bucket of Spongetech shares for 5 cents and sold them for 20 cents. To whom those profits went is still in question and I have some doubts that Weiner actually has $1.3 million to pay the SEC fine. So while this is a win for the SEC because Weiner likely spilled some dirt on Metter and Moskowitz to get a deal with the SEC; defrauded investors in Spongetech shouldn’t count it as a big score until we see the SEC actually collect the dollars.

As Aaron Elstein at Crain’s New York first reported, Moskowitz made a plea deal with the DOJ a few months ago, and the SEC has finally released a little money for him to live on. But we still have no plea deal with Moskowitz and the SEC, nor do we have a sentencing date for Moskowitz in his DOJ case. Legal filings in the SEC v. Metter case show he’s still fighting the charges tooth and nail. As I reported earlier Metter also still reaps a decent salary from his Greenwich Radio station; although the station’s assets and spending are being monitored by the SEC.

A few lawyers representing Spongetech investors have said they filed motions to get the SEC to share discovery with them, which could help their civil investor fraud suits against Metter and Moskowitz, but the SEC just blows them off; so for now it’s still a bit of a clusterfuck. If the SEC figures out the Spongetech founders funneled money to Israel or Switzerland then they could sue the banks holding the cash under the Hauge Convention but that takes at least a year. So with all the parties involved flipping to get deals with the DOJ I’d imagine we’ll see Metter pleading to something in the new year.

Editors Note: Aaron Elstein of Crain’s New York has some more color on Weiner and reports Avi Tepfer has finally folded also declaring he plans to plead guilty in the DOJ’s case against him early next year. Unlike Metter’s home town paper, Greenwich Time, Elstein via Crain’s has done a bang up job of continuing to cover the Spongetech fraud. You can read more of his coverage here.