SEC Admin Proceeding: Olde Monmouth Stock Transfer Regarding Transfers of Spongetech Stock
Yesterday, the SEC announced public administrative and cease-and-desist proceedings against Olde Monmouth Stock Transfer Co., Inc. and its president, Matthew J. Troster.
According to the SEC, Olde Monmouth processed more than 200 transfers of Spongetech and Analytica shares after removing the restrictive legends on those shares, based on opinion letters that were facially deficient.
Olde Monmouth was the transfer agent for Spongetech from 2006 until June 2009. Spongetech Delivery Systems Inc.’s stock was traded on the OTC Markets under the ticker symbol “SPNG” until being suspended by the SEC in October 2009.
According to Craine’s, advertisements where placed (and frequently not paid for) at Madison Square Garden and “The New York Mets got stiffed out of nearly $3 million by Spongetech. The New York Yankees, New York Giants, Boston Red Sox, Chicago Bears and Chicago Blackhawks also were left in the lurch after carrying ads in their stadiums that were vital in granting an aura of legitimacy to one of the more audacious penny-stock scams to emerge in years“.
According to the SEC, Olde Monmouth continued to issued stock in Spongetech without a restrictive legend despite multiple red flags including;
– The high frequency with which Spongetech claimed that transactions were exempt from registration.
– Around May 14, 2009, Spongetech’s Counsel advised Olde Monmouth that he had not written an opinion letter for Spongetech since 2007 (Olde Monmouth had regularly—and as recently as May 11, 2009—been receiving opinion letters purportedly authored by Spongetech’s Counsel, and Olde Monmouth had processed scores of transactions since 2007).
– Some of the forged opinion letters contained beneficiary information that “was in an obviously different font type and size than that used in the rest of the letter”.
– In October 2009, staff from the SEC’s office of Compliance Inspections and Examinations (“OCIE”) conducted a routine transfer agent examination of Olde Monmouth. As part of that examination, on October 23, 2009, OCIE staff met with Olde Monmouth and Troster to discuss “instances in which items were submitted requesting that restrictive legends be removed and the accompanying documentation clearly raised ‘red flags.’”
– Matt Troster was aware that the Commission had filed a complaint against Spongetech and certain associated individuals for violating Section 5 of the Securities Act, among other violations.
As a result of the proceeding, Olde Monmouth is required to make a number of oversight and compliance changes and pay penalties and fines of approx. $200,000.
See the SEC’s full ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS HERE.