Legal

SpongeTech Inquiry Leads to Another Sanction

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Former SpongeTech Delivery Systems CFO Steven Moskowitz has been sanctioned by the Securities and Exchange Commission, which barred him from practicing before the commission as an accountant. The bar came as a result of a stock manipulation scam in which Moskowitz earlier pleaded guilty to a criminal charge of securities fraud. Another associate, Myron Weiner previously agreed to disgorge $1.3 million in a civil suit. The commission alleged “that from at least April 2007, Moskowitz and others engaged in a scheme to increase demand illegally for, and profit from, the unregistered sale of publicly-traded stock in SpongeTech by, among other things, ‘pumping’ up demand for SpongeTech stock through false public statements about non-existent SpongeTech customers, fictitious sales orders, and phony revenue.”

The SEC halted trading of SpongeTech shares in October 2009, at which time regulators cited a variety of issues with the company’s financials. It had not filed anything with the commission since February 2009.

Markets

With Rodman & Renshaw Team Scattered, EPP Banking Biz Up for Grabs

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The sunset of prolific placement agent Rodman & Renshaw leaves the private placement market with a gaping void that once-rival investment bankers are hoping to exploit. “There’s obviously a vacuum that has been created,” said John Borer, the former head of investment banking at Rodman who is spearheading a more robust banking effort at New York-based Benchmark Co. “I don’t think any one entity is going to pick up those 70 to 80 deals that Rodman did . . . they’ll be spread out across the Street.”

From the beginning of 2006 through mid-September this year, when the firm notified regulators that it was ceasing operations, Rodman had a hand in facilitating 426 placements that raised nearly $7 billion in gross proceeds, according to PlacementTracker, a service of Sagient Research that tracks equity private placements (EPP) of more than $1 million.

Legal
Corey Ribotsky

NIR Group Investors Faced with 97% Loss

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Investors in beleaguered PIPE fund manager N.I.R. Group received harsh news last week when the court-appointed liquidators for the firm’s hedge funds told them in a group conference call the once $800 million funds had lost of 97% of their value. The loss was disclosed on 2011 tax forms for reporting partnership income known as K-1s,  provided by the liquidator to the investors. The news was equally troubling because the funds’ general partner, Corey Ribotsky, had told them just months before that there was still near $400 million of value in the assets. Ribotsky was sued by the Securities and Exchange Commission for two counts of investor fraud and breach of fiduciary duties last September. Growth Capital Investor reported the SEC added to their fraud claims last month with an amended complaint detailing internal whistleblowers, investor emails, and testimony from outside auditors who explained the methods Ribotsky used to allegedly mislead investors about the value of the funds’ assets while he managed the money and took fees.

Markets

No Guidance: Emerging Growth Issuers Largely Immune to Broad Market Sentiment

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For all the focus being placed on boosting small business to create jobs and fuel an economic recovery, emerging growth companies struggling to find traction in the public markets. As a group, small issuers that have conducted private placements over the last several months have generally lagged the stock market’s rise over the last year – the Dow Jones Industrial Average Index has risen 20% - suggesting that the firms are less influenced by broad market sentiment. But exactly how far out of whack is the performance of small private placement issuers with the rest of the market? Growth Capital Investor reviewed equity private placement (EPP) activity from June 1, 2011 through May 30, 2012, using Sagient Research’s PlacementTracker database. The deals focused on growth equity private placements (GEPPs): unregistered and registered common stock sales, rights offerings, fixed-price convertible issuances, and non-convertible debt and preferred stock sales, issued at fixed-price issuance and conversion terms. No placements involving variable-priced securities, equity lines or at-the-market offerings were included.