SEC Charges Ten with Trading Unregistered Stock, Puts Assets on Ice

Company pivots from producing fashion bags to biomed tech. Ends up frozen and bagged.
By MainStreet Team ,

By Hal M. Bundrick

NEW YORK (

MainStreet

)--Biozoom, Inc. stock got put on ice and the U.S. brokerage accounts of eight Argentine defendants were frozen this week as the SEC leveled charges of the unlawful sale of millions of shares of unregistered stock.

In April, Biozoom, formerly Entertainment Art, Inc., announced that it was changing its name and moving from producing fashion leather bags to developing biomedical technology. Shortly thereafter the SEC claims 10 defendants received more than 20 million shares of Entertainment Art, one-third of the company's total outstanding shares. No registration statement allowing the public trading of shares was in effect at the time, according to the SEC.

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In a one-month period, eight of the defendants sold more than 14 million shares, banking nearly $34 million -- $17 million of which was wired to overseas bank accounts. Their U.S. brokerage accounts, which include approximately $16 million in cash, are subject to the asset freeze.

According to the SEC's complaint, when the defendants deposited the Biozoom stock into their U.S. brokerage accounts for trading, they claimed to have acquired the bulk of the shares in March 2013 from Entertainment Art shareholders. The SEC alleges that Entertainment Art investors had sold all of their stock in the company in 2009, almost four years earlier.

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Trading in Biozoom shares was suspended last week.

The SEC's complaint, filed in U.S. District Court in Manhattan, charges the eight defendants -- Magdalena Tavella, Andres Horacio Ficicchia, Gonzalo Garcia Blaya, Lucia Mariana Hernando, Cecilia De Lorenzo, Adriana Rosa Bagattin, Daniela Patricia Goldman and Mariano Pablo Ferrari -- along with two others, Mariano Graciarena and Fernando Loureyro, who received shares but have yet to sell them.

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In addition to the temporary restraining order and asset freeze granted by the court, the SEC is seeking preliminary and permanent injunctions, return of the selling defendants' allegedly ill-gotten sale proceeds, and civil penalties. The SEC also seeks preliminary and permanent injunctions against the non-selling defendants, Graciarena and Loureyro, because of the likelihood that both defendants will offer or sell their Biozoom shares to the public, in violation of the registration requirements of U.S. securities law.

--Written by Hal M. Bundrick

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