Three men charged with fraud in $100 million New Jersey deli scheme

Three men were charged with fraud and different crimes successful a strategy involving a institution that was worthy $100 cardinal successful the banal marketplace contempt having lone a small-town New Jersey deli to its name, national authorities said Monday.

The men – James Patten, 63, of Winston-Salem, North Carolina; Peter Coker Sr., 80, of Chapel Hill, North Carolina; and Peter Coker Jr., 53, of Hong Kong – were charged with 12 counts, including conspiracy to perpetrate securities fraud, securities fraud and conspiracy to manipulate securities prices. Patten and Coker Sr. were arrested and appeared successful a North Carolina tribunal connected Monday. They are expected to look successful New Jersey national tribunal astatine a aboriginal date. Coker Jr. is inactive astatine large.

Federal prosecutors said Patten is besides charged with 4 counts of manipulation of securities, 4 counts of ligament fraud, and a number of wealth laundering. The men were besides accused of marketplace manipulation by the U.S. Securities and Exchange Commission. Coker Jr. was president of Hometown International, portion Coker Sr. was a large shareholder.

Your Hometown Deli, the concern astatine the halfway of the probe, was located successful Paulsboro, New Jersey, implicit the Delaware River from Philadelphia. The deli, lauded for its cheesesteaks and Italian subs, had nether $40,000 successful yearly gross and closed earlier this year. The genitor company, Hometown International, had merged with a bioplastics company. Fellow ammunition institution E-Waste besides merged with different steadfast past year.

The contention surrounding Your Hometown Deli and the radical progressive successful it prompted questions astir whether its genitor institution was operating wrong the law. The accusations besides are connected to the men's engagement successful E-Waste.

The $100 cardinal New Jersey deli, arsenic Your Hometown Deli came to beryllium known, was archetypal brought to the public's attraction by capitalist David Einhorn in a 2021 missive to clients. CNBC reported further connected the company, including by unearthing much details astir its then-CEO, Paul Morina, a legendary precocious schoolhouse wrestling manager successful confederate New Jersey. Morina was later fired arsenic CEO.

Patten, 1 of the men charged successful the scheme, wrestled successful precocious school with Morina. Prosecutors said Patten convinced the owners of the deli, which was established successful 2014, to enactment it nether the power of an umbrella company, called Hometown International.

"Unbeknownst to the deli owners, astir instantly aft Hometown International was formed, Patten and his associates began positioning Hometown International arsenic a conveyance for a reverse merger that would output important nett to them," prosecutors said successful a release.

In 2019, Hometown International started selling shares connected what's known arsenic the OTC Marketplace, wherever banal of tiny companies is traded.

"Shortly thereafter, Patten, Coker Sr., And Coker Jr. undertook a calculated strategy to summation power of Hometown International's absorption and its shares from the deli owners," prosecutors said. The men took akin actions to instrumentality power of E-Waste, prosecutors said. That company's shares surged, too, adjacent though it didn't person immoderate existent business, according to CNBC reporting.

Prosecutors said the tactics "artificially inflated" the values of Hometown International and E-Waste banal by 939% and 19,900%, respectively.

As of past year, Patten was barred by FINRA, the broker-dealer regulator, from acting arsenic a stockbroker oregon associating with broker-dealers. He was the taxable of repeated disciplinary actions by FINRA. In 2006, helium successfully appealed sanctions issued by an SEC justice successful a lawsuit wherever helium was accused of manipulating the terms of a banal listed connected the Nasdaq. Patten was defended successful that substance by Ira Sorkin, who was champion known for representing Ponzi strategy kingpin Bernie Madoff.

The Cokers and Patten look steep situation sentences and fines. The securities fraud and securities terms manipulation counts transportation maximum penalties of 20 years successful situation and a $5 cardinal fine. The ligament fraud and wealth laundering counts besides person maximum penalties of 20 years successful prison. The conspiracy to perpetrate securities fraud and conspiracy to manipulate securities prices counts each transportation a maximum punishment of 5 years successful prison.

Coker Jr. and Sr. are father and son. CNBC had antecedently reported connected their concern dealings and different misadventures.

There were nary lawyers of grounds for the defendants arsenic of Monday afternoon, according to the U.S. Attorney's Office successful New Jersey. An effort to scope Morina was unsuccessful.

Read the afloat indictment here.