DOJ, SEC charge three men with securities fraud for scheme involving New Jersey deli

A father-son duo and their long-time friend are facing charges of securities fraud for allegedly conspiring to enrich themselves by manipulating the stock prices of two public companies. 

According to a complaint filed by the Department of Justice, Peter Coker Sr., 80, and James Paten, 63, both of North Carolina, and Peter Coker Jr., 53, of Hong Kong, took steps to gain control of Hometown International and a separate shell company called E-Waste Corporation with the intention of selling their shares at a significant profit through reverse mergers. A reverse merger is a transaction where an existing public company merges with a private operating company. 

After gaining control of the companies, the trio allegedly arranged for the transfer of millions of the company's shares to a number of entities, including some controlled by Coker Jr., as well as to the trading accounts of family members, friends and associates. The accounts were then accessed to commit a number of "match and wash" trades.

"These tactics artificially inflated the price of Hometown International and E-Waste’s stock by giving the false impression that there was a genuine market interest in the stock," the DOJ said. "Their scheme had the ultimate impact of artificially inflating Hometown International’s stock by approximately 939 percent and E-Waste’s stock by approximately 19,900 percent."

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Hometown International, which began selling shares around October 2019 on the OTC Marketplace, operated Paulsboro, New Jersey-based Your Hometown Deli.

The deli closed on Aug. 9 after Makamer Holdings disposed of its subsidiary Your Hometown Deli, LLC. In addition, the company disposed of any remaining inventory. All Your Hometown Deli, LLC transactions have been recorded as discontinued operations as of June 30, 2022, a regulatory filing said.

The Securities and Exchange Commission says Hometown International saw its share price climb from approximately $1 per share in October 2019 to nearly $14 per share by April 2021, leading to a "grossly inflated" market capitalization of $100 million for one deli that produced less than $40,000 in annual revenue.

The DOJ has charged each of the three men in a 12-count indictment with conspiracy to commit securities fraud, securities fraud, and conspiracy to manipulate securities prices. Patten is also charged with four counts of manipulation of securities, four counts of wire fraud, and one count of money laundering.

Additionally, the SEC has accused all three men with market manipulation in a separate complaint. The complaint seeks injunctive relief, disgorgement plus prejudgment interest, civil penalties, a prohibition against participating in any penny stock offerings, and an officer and director bar against Coker Jr.

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Patten and Coker Sr. were arrested Monday and are scheduled to appear in federal court in the Middle District of North Carolina. They will appear in court in the District of New Jersey at a later date. Coker Jr. remains at large. 

The securities fraud and manipulation of securities prices counts each carry a maximum penalty of 20 years in prison and a $5 million fine. The wire fraud and money laundering counts are punishable by a maximum penalty of 20 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greatest. The counts of conspiracy to commit securities fraud and conspiracy to manipulate securities prices both carry a maximum penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greatest.