Now a financial mess is threatening the company's future.  NASDAQ froze shares of the company's stock on Monday pending further news.  On Tuesday it was revealed that the freeze was due to the result of a pending investigation.

According to a report by WISN-TV in Milwaukee, home of the company's headquarters, Koss vice president of finance has been arrested and charged with wire fraud.  Sujata Sachdeva, an employee with the company since 1992, reportedly embezzled $4.5M USD from the company and bought a variety of clothing and jewelery.  Ms. Sachdeva, 46-years-old, has been placed on administrative leave.

Released information also indicates that Ms. Sachdeva served the role Koss's corporate secretary - one of the company officials who signs the financial statements the publicly traded firm must file with the U.S. Securities and Exchange Commission.  Essentially, she acted as the company's CFO, though she did not officially hold the title.

Apparently Ms. Sachdeva's criminal activity was unusually brazen, with her leaving piles of clothing on her desk with price tags still on them.  Most of the items were purchased at high-end clothing and jewelry shops.

While her activities may have been blatantly criminal, she was well liked.  She was known as a kind and charitable person, regularly raising money for charities like Boys & Girls Club and Big Brothers Big Sisters.

Recalls Tony Chirchirillo, owner of Valentina, an upscale clothing store where Sachdeva allegedly spent more than $1.3 million over the last two years, "I knew her as a wonderful lady who was a good customer.  She was always involved in civic issues.  I can't make judgments on what people spend.  It's relative. If you're making five times as much as I do, you're going to spend five times as much."

She also spent a lot at other shops including $670,000 at Au Courant, $649,000 at Zita, and $213,500 at Gigi of Mequon, and $127,400 at A.C. Zuckerman Jewelers.

Ms. Sachdeva was reportedly only caught when American Express contacted Koss Corp. CEO Michael J. Koss (son of the company's founder) about large purchases made by wire transfers from a Koss corporate account.  When confronted by federal agents, Ms. Sachdeva confessed to the scheme.  She said she had covered up 2 years of embezzlement by falsifying company balances.  She began directing her assistant 3 months ago to begin the illegal wire transfers to further sating her lust for big ticket items.

The incidents closely mirror a recent embezzlement scandal at brick-and-mortar electronics retailer Frys.