The Securities and Exchange Commission recently announced charges against ten Argentine citizens who unlawfully sold millions of shares of Biozoom, Inc. in unregistered transactions. The SEC also obtained an emergency order to freeze assets in the U.S. brokerage accounts of the defendants. The ten Argentinians allegedly received more than one-third of Biozoom’s shares when the company changed their name from Entertainment Art and moved from producing leather bags to developing biomedical technology. In a one month span, the defendants then sold more than 14 million of the shares for a profit of 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. According to the SEC’s complaint, the defendants claimed they had purchased their shares from Entertainment Art shareholders between November and March. However, the SEC has said that these agreements were false because the Entertainment Art shareholders had sold all of the stock three years earlier. “Today’s action, along with the SEC’s trading suspension order last week, demonstrate the SEC’s ability and commitment to act swiftly to halt ongoing illegal conduct and preserve assets,” Antonia Chion, associate director of SEC enforcement, said in the agency’s statement.
The Securities and Exchange Commission announced three new initiatives that will build on its Division of Enforcement’s ongoing efforts to concentrate resources on high-risk areas of the market and bring new technology and analytical capacity to bear in its investigations. The new Financial Reporting and Audit Task Force will be dedicated to detecting fraudulent financial reporting and is designed to enhance ongoing enforcement efforts related to accounting and disclosure fraud. The enforcement division also formed the Microcap Fraud Task Force to target abusive trading in securities by microcap companies, focusing on those that do not regularly report their financial results publicly. In addition, the SEC has created the Center for Risk and Quantitative Analytics, which will support and coordinate the division’s risk identification and assessment through data and analysis. The initiatives are an indication of the SEC’s increasingly vigorous approach to identifying fraud. “By directing resources, skill, and experience to high-impact areas, we will increase the potential for uncovering financial statement and microcap fraud early and bring more cases aimed at deterring these types of unlawful activity,” division co-director Andrew Ceresney said in the release.