To the Honorable Chief Judge Stuart Bernstein.

RE: 10-13647-smb SpongeTech Delivery Systems Inc.

Your Honor, First I would like to thank you very much for the time you have taken to include the shareholders point of view regarding this case. You are helping us make a difference. We greatly appreciate that.

We the undersigned shareholders of SpongeTech Delivery Systems respectfully request that you look into the matter of the "ILLEGAL" naked short selling (NSS) of SpongeTech Delivery Systems stock.

Your Honor, when I was in your court for the hearing regarding the replacing of Mr. Hay's as a trustee, you asked a shareholder what NSS is. He did not give a very good explanation. I would like to give you a better one. First you must understand short selling (which is legal) In short selling a stock you are basically betting the price per share will go down. You must find someone who owns shares and borrow a certain amount of shares from that shareholder. Once the shares are "loaned" to you, they are immediately sold by you. You must buy these shares back within a predetermined time and return them to the one who loaned them to you. If for example I borrowed 10 shares of XYZ company stock valued at $10 per share. $100 total value. Then sold them immediately into the market for $100. I would have to buy them back at whatever they were selling for at the time. If as expected the price per share goes down to say $7 per share. I buy the shares back for $70 return them to the person I borrowed them from and keep the $30 difference. If the price per share goes up. I must still purchase the shares and return them at a loss to myself.

With naked short selling which is illegal. The stock is never borrowed to begin with but still sold into the market. This cannot be done by the average retail investor. It can only be done by large financial institutions. Hedge funds and the like. They can do this because it is taken for granted that they have indeed already borrowed the shares needed. In effect they are selling "Non Existent" shares and keeping the proceeds as profit. To put it bluntly they are selling counterfeit shares. The addition of these "counterfeit" shares into the market causes a cascading effect driving down price per share.

Now here is the interesting part. Once naked short selling has been started, the company that was sold short must be driven out of business. You see, once the business has gone under there is no way for anyone to find out what really happened. The books are closed and the criminal perpetrators of the naked short selling never have to cover their cost of the counterfeited shares. This task is accomplished by the hedge funds or other financial institutions. They hire people to post messages on internet sites such as Yahoo and Google and many more to bash the targeted company with exaggerated claims of wrong doing or other improprieties by a company or its executives. (Companies like this are prime targets for these criminals) Combine this with the power to have the press write negative story after negative story and you have what is called the "short and distort"

Most of the time a company gets attacked by a short and distort shareholders get scared and sell their stock to avoid more losses. This usually causes a faster demise of the company. This time however the criminals who pulled the short and distort on SPNG did not count on the SPNG Long Board with over 700 shareholder members banding together to stay informed on what was really happening. They also did not count on the Honorable Chief Judge Stuart Bernstein to listen to our pleas for help.

Your Honor. What we wish is for the court to order a complete and total FORENSIC share count. Including but not limited to an "independent third-party reconciliation of the
stock transfer register (STR)" maintained by the company.   The company’s STR reflects the legally outstanding shares as of some date.  It needs to be reconciled with the DTCC OBO (Objecting Beneficial Owners)/NOBO (Non Objecting Beneficial Owners) lists,
including reports of positions held in Euroclear/Clearstream.  There is still no way to get the “Ex-Clearing” numbers, so they have to be left out. If the SEC were willing or forced to do it, they would compare the daily trading volume from the Blue Sheets and CNS reports against the STR.  But the SEC has consistently avoided doing this citing privacy matters, etc.

Your Honor you heard Mr. Silverman estimate that there are as much as 50 Billion shares sold naked of SPNG stock. More conservative estimates place them at 10 Billion shares. Even with the 3 Billion shares allegedly illegally dumped into the market by SPNG management there are over 3 to 7 times that amount of shares that have actually been sold into the market. This is why when several shareholders requested their stock certificates be sent to them by their brokers they were told “We cannot send you your certificates because we cannot verify their authenticity" or "If we send you your certifications we will not take them back because we cannot verify their authenticity." Your Honor, We hope you find those statements as disturbing as we do. If Your Honor can order and receive the forensic share count and devise a mechanism to force the criminal naked short seller perpetrators to buy back all the counterfeit shares SPNG could easily pay their way out of bankruptcy. Thereby satisfying ALL the creditors and shareholders’ needs. We know this is a daunting task Your Honor but we are glad to see it in your capable hands. Thank you for hearing us once again.

Sincerely,

James Sasser on behalf of the undersigned shareholders and The SPNG Long Board.

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