Federal authorities announced on Monday, September 26, that three men have been charged with fraud and other crimes in a scheme involving a company worth $100 million in the stock market. The company was worth that much despite having only a small-town New Jersey deli to its name, according to NBC News.
James Patten of Winston-Salem, North Carolina; Peter Coker Sr. of Chapel Hill, North Carolina; and his son Peter Coker Jr. of Hong Kong were charged with 12 counts, including securities fraud, conspiracy to manipulate securities prices, and conspiracy to commit securities fraud. Coker Sr. and Patten were arrested on Monday, while Coker Jr. is still at large.
Federal prosecutors said Patten is also charged with four counts of wire fraud, four counts of manipulation of securities, and a count of money laundering. The U.S. Securities and Exchange Commission (SEC) also accused the three men of market manipulation.
Your Hometown Deli at the center of the feds' probe
The company at the center of the probe is Your Hometown Deli, a business located in Paulsboro, New Jersey, over the Delaware River from Philadelphia. The deli, lauded for its Italian subs and cheesesteaks, made under $40,000 in annual revenue. It closed earlier this year.
Your Hometown Deli's parent company, Hometown International, had merged with a bioplastics company. The controversy surrounding Your Hometown Deli and the people involved in its operations prompted questions about whether Hometown International was operating within the law.
The accusations were also connected to the three men's involvement in a fellow shell company, E-Waste, which also merged last year with another company. The $100 million New Jersey deli was first brought to the public's attention by investor David Einhorn in a letter to clients.
CNBC reported on the company, including unearthing more details about Paul Morina, a legendary high school wrestling coach in southern New Jersey who became Your Hometown Deli's CEO.
Patten and associates positioned parent company as a vehicle for a reverse merger
Patten, one of the men charged in the scheme, wrestled with Morina back in high school. According to prosecutors, Patten was able to convince the owners of the deli, established in 2014, to put the business under the control of an umbrella company, Hometown International.
Prosecutors said in a release that almost immediately after Hometown International was formed, Patten and his associates began positioning it as a vehicle for a reverse merger, unbeknownst to the deli owners. It was a move that would yield substantial profit to Patten and co.
Hometown International then started selling shares back in 2019 on what is known as the OTC Marketplace. This is where shares of small companies are traded. Patten, Coker Sr., and Coker Jr. undertook shortly after that a calculated scheme to gain control of Hometown International's management as well as its shares from the deli owners, according to Reuters. Prosecutors said they did the same thing with another small company, E-Waste.
