From Handbags to BioMedical, Hey?

MANHATTAN (CN) - The SEC seeks an emergency order freezing accounts of 10 Argentinians who sold $34 million of penny stocks and are trying to sell more.

In an announcement that seems suspicious enough in itself, Biozoom said in April that it was changing its name from Entertainment Art and getting out of making leather bags and into biomedical technology.

From May through June, the 10 defendants sold more than 14 million shares of the old company for $34 million, and sent half of it overseas, the SEC said. It wants to freeze the U.S. brokerage accounts, which have about $16 million.

The SEC suspended trading in Biozoom shares last week "due to concerns that some shareholders may be unlawfully distributing its securities," the agency said in a statement.

All the defendants live in Buenos Aires. The first eight are charged with selling their Entertainment Art shares in unregistered transactions. They 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.

The final two defendants are believed to have shares but have not yet sold them. They are Mariano Graciarena and Fernando Loureyro.

The SEC said in its statement: "When the defendants deposited the Biozoom stock into their U.S. brokerage accounts, they claimed to have acquired the bulk of the shares in March 2013 from Entertainment Art shareholders who purchased them in private placements that began in 2007. Each of the defendants provided stock purchase agreements between them and the former shareholders purportedly signed by the defendants and those shareholders. The SEC alleges that the documents were false because the Entertainment Art investors had sold all of their stock in the company in 2009, almost four years earlier. The defendants' shares of Biozoom were deposited into their accounts as shares that purportedly could be freely traded and the defendants sold them even though no registration statement was filed with the SEC for any of the sales transactions, in violation of U.S. law."

In addition to the asset freeze, the SEC seeks disgorgement, penalties and an injunction.

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