The top executives at Spongetech Delivery Systems Inc., a small company that frequently advertised at various sport venues, including the Yankee Stadium, have been arrested and charged in an alleged investment fraud scheme. According to U.S. Attorney Loretta Lynch, “the defendants in this case – Spongetech’s highest corporate officers – are charged with executing a bold scheme to portray Spongetech as a company that was performing at a level far above reality.” Based on the criminal complaint, Michael Metter, Spongetech’s chief executive and president, and Steven Moskowitz, chief operating officer and chief financial officer, were charged with conspiracy to commit securities fraud and obstruction of justice. Each of these executives could face up to five years in prison. This complaint isn’t the only problem for these executives, as the U.S. Securities and Exchange Commission (SEC) has also filed civil charges in connection with this alleged fraud. The SEC has referred to the matter as a “pump-and-dump” scheme.From January 2007 to May 2010, Mr. Metter and Mr. Moskowitz allegedly made public reports that the company had secured purchase orders or made sales to five customers that weren’t real, according to prosecutors from the U.S. Attorney’s office in Brooklyn. Those reported sales made up as much as 99 percent of Spongetech’s revenue. The executives allegedly filed numerous false reports with the SEC and also created multiple press releases that boasted the fictitious sales figures. Based on a civil lawsuit, Mr. Metter and Mr. Moskowitz committed this alleged fraud with the intent to fraudulently inflate Spongetech’s stock price.Supposedly, the executives illegally distributed approximately 2.5 billion company shares at the inflated prices, said the SEC.