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Jul 03

SEC Freezes accounts used in illegal sales of unregistered shares of Biozoom $BIZM

Earlier today the SEC announced that it froze accounts of eight different Argentinians who had illegally sold unregistered shares of Biozoom (BIZM). Two others who had not yet sold shares also had their accounts frozen. A week ago the SEC suspended trading in Biozoom. See my original post on the Biozoom promotion as well as the Promotion Stock Secrets post on the individuals behind the promotion.

SEC press release
SEC complaint

The sheer number of shares sold and the profits involved are impressive. Here is a good description of what transpired from the SEC press release:

The SEC’s complaint alleges that from March to June 2013, the ten defendants received more than 20 million shares of Entertainment Art, which was one-third of the company’s total outstanding shares. In a one-month period beginning in mid-May, eight of them sold more than 14 million shares. The sales yielded almost $34 million, of which almost $17 million was wired to overseas bank accounts. Their U.S. brokerage accounts, which include approximately $16 million in cash, are subject to the asset freeze.

The ten defendants in the litigation are: Magdalena Tavella, Andres Horacio Ficicchia, Gonzalo Garcia Blaya, Lucia Mariana Hernando, Cecilia De Lorenzo, Adriana Rosa Bagattin, Daniela Patricia Goldman and Mariano Pablo Ferrari (Mariano Graciarena and Fernando Loureyro are also named but had not yet sold shares). The defendants claimed to have purchased shares in Biozoom (then known as Entertainment Art Inc.) from the company’s original seed shareholders between November 2012 and March 2013, but those shareholders had already sold all their shares back in 2009.

Despite the SEC’s quick action, over $17m in illicit profits were already wired overseas and are now beyond the reach of American authorities. Most likely none of the individuals whose names appeared on the accounts were behind the fraud. It is believed by many that Francisco Abellan has controlled scheme from the start.

The US brokerages used by the defendants are well-known to everyone who is familiar with the penny stock world: Legend Securities and Scottsdale Capital Advisors.

For further details, I suggest reading Promotion Stock Secret’s post on this litigation (same post as here).

Disclaimer: I am net long 1700 shares of BIZM (long 11,700 shares in one account and short 10,000 shares in another account); I have no positions in any other stock mentioned and no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

4 comments

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  1. Michael Goode

    BIZM got a DTC/ DTCC global lock. Read more about that here: http://promotionstocksecrets.com/what-are-dtc-chills-and-locks-and-how-can-they-affect-me/

  2. xerty

    Do you know who gets stuck holding the bag for these illegal/unregistered stock sales? Clearly these guys walked with $17M, but is it their trade counter parties, the brokers who accepted the shares, or someone else who gets stiffed?

    1. Michael Goode

      That is a good question. In this case the shares they sold did exist (share counterfeiting happens sometimes) although they were not free-trading. So the trades stand and whoever bought those shares still has them. It is too late to go back and bust the trades made days or weeks ago.

      1. xerty

        So I guess it’s the average shareholder of the company who lost, since they just got diluted by the addition of these new, duplicate shares. In fact, they got diluted for the full $34M amount, not just the $17M amount the criminals escaped with, since the funds seized by the SEC tend to go to the Treasury if they can’t figure out a directly harmed party to reimburse. With 60M shares outstanding, this scam resulted in a 1/3 loss of value for prior shareholders.

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