Themis Thoughts: FRE and SpongeTech, both pump and dumps
There are three movies that everybody who works on Wall Street must have watched: Wall Street, Glengarry Glen Ross, and Boiler Room. Boiler Room came out just at the peak of the internet bubble in 2000. It was about a young college drop out who goes to work for bucket shop called JT Marlin in Long Island. All the brokers were making a killing as they were selling stock in companies that didn’t even exist. They were getting “$2 rips, which were unheard of on Wall Street”. Ben Affleck had a great line in the movie: “You Want details? Fine. I drive a Ferrari, 355 Cabriolet, What’s up? I have a ridiculous house in the South Fork. I have every toy you could possibly imagine. And best of all kids, I am liquid.” Well, it looks like the owners of SpongeTech (you may have seen their infomercials) must have watched Boiler Room a few too many times. They were charged yesterday with securities fraud and were alleged to be involved in a pump and dump scheme where they allowed insiders to sell 2.5 billion shares of stock that they claimed didn’t exist. SpongeTech also claims that 5 customers represented 99% of their sales. Only problem is that these customers never even existed.
Speaking of squeezing a sponge dry, one of the wards of the state, Freddie Mac, is back again and asking for more money from the US government. They are looking for another $10 billion from Uncle Sam after they lost $8 billion in the first quarter. The CEO of Freddie had these encouraging words: “But as we have noted for many months now, housing in America remains fragile with historically high delinquency and foreclosure levels, and high unemployment among the key risks.” Maybe the SEC should be looking into Freddie Mac and investigate them for being a pump and dump scheme. We can just hear Vin Diesel now calling the rich doctor and pitching some FRE: “Hi Dr Jacobs, this is Chris Marlin over at J.T. Marlin. I’d like to tell you about Freddie Mac. This stock is red hot. Now, I’ve got a million more calls to make. So, what do you say? You know you can’t lose here, heck, they are backed by the US freakin government. And we know, if the government gets into trouble, they could just keep print more cash. Dr. Jacobs this is better than a Ponzi scheme. You gotta get in.”