U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23174 / January 16, 2015
Securities and Exchange Commission v. Magdalena Tavella, Civil Action No. 13-CIV-4609 (J. Buchwald) S.D.N.Y. (filed July 3, 2013)
The Securities and Exchange Commission (Commission) announced today that on January 9, 2015, the U.S. District Court for the Southern District of New York entered default judgments against eight Argentine citizens, Magdalena Tavella, Andres Horacio Ficicchia, Gonzalo Garcia Blaya, Lucia Mariana Hernando, Cecilia De Lorenzo, Adriana Rosa Bagattin, Daniela Patricia Goldman, Mariano Pablo Ferrari (collectively, "selling defendants"). In addition to ordering permanent injunctions from violating the securities registration laws, the Court permanently barred defendants from participating in penny stock offerings and ordered defendants to disgorge a total of $33,336,801 and to pay penalties of $160,000 per defendant, for a total of $34,616,801. On December 4, 2014, the Court had entered consent judgments against Mariano Augusto Graciarena and Fernando Loureyro ("non-selling defendants"), ordering them to relinquish all claims to a total of 4.445 million shares of Biozoom stock held in brokerage accounts in their names and to transmit the physical certificates representing those shares to the transfer agent with instructions that the certificates be cancelled.
On July 3, 2013, the Commission filed an emergency action seeking a temporary restraining order and asset freeze against defendants, and alleging that they were engaged in an ongoing, unlawful distribution of shares of Biozoom stock without an effective registration statement for their sales. The SEC's Complaint alleged that Biozoom, formerly Entertainment Art, Inc., announced in April 2013 that it was changing its name and moving from producing leather bags to developing biomedical technology. The Complaint further alleged that from March to June 2013, the ten defendants received more than 20 million shares of Entertainment Art, constituting over one-third of the company's total outstanding shares. According to the Complaint, when the defendants deposited the Biozoom stock into their U.S. brokerage accounts, they claimed to have acquired the shares from Entertainment Art shareholders ("S-1 shareholders") who had purchased them in private placements that began in 2007. Each of the defendants provided stock purchase agreements between themselves and the S-1 shareholders, which were purportedly signed by the defendants and those shareholders. The SEC alleged, however, that these share purchase documents were fabricated, because the S-1 shareholders had sold all of their stock in the company no later than 2009. Consequently, although defendants' shares of Biozoom were deposited into their brokerage accounts as shares that purportedly could be freely traded, no registration was in effect for those shares.
According to the Commission's complaint, from May 16, 2013 until June 25, 2013 - when the SEC suspended trading in Biozoom shares - the selling defendants sold more than 14 million shares, for proceeds of almost $34 million. Prior to the court's July 3, 2013 institution of the temporary restraining order, the selling defendants had wired almost $17 million of those proceeds to overseas bank accounts. Their U.S. brokerage accounts, which include approximately $16 million in cash, are subject to the asset freeze. As a result of the Commission's emergency July 3, 2013 action, the court entered an order freezing the defendants' U.S. brokerage accounts, which contained approximately $16 million in cash.
For further information about the case, see Litigation Release No. 22742 (July 3, 2013). The SEC's investigation in this matter is continuing.