Topline
The Securities and Exchange Commission charged three men on Monday with artificially inflating the share price of a company that’s only asset was a deli in suburban New Jersey, notoriously pushing the publicly-traded firm to a valuation of more than $100 million.
Your Hometown Deli, which closed in June, charged $7.75 for cheesesteaks.
Key Facts
Father-and-son pair Peter Coker Sr. and Peter Coker Jr. and their associate James Patten are facing civil charges from the SEC and separate criminal charges from federal prosecutors in New Jersey for alleged market manipulation and securities fraud.
The three men allegedly took control of the outstanding shares of deli operator Hometown International as well as a shell company called E-Waste Corp., and inflated the companies’ share prices through manipulative trading schemes, the SEC and federal prosecutors said in statements Monday.
The defendants were accused of using the two entities to snap up private companies in reverse mergers with the intention of dumping their shares at “grossly inflated prices.”
The scheme was thwarted after the inflated stock prices and the bizarre connection to a local deli received media attention in 2021, the SEC said, preventing the three from profiting off the inflated shares.
All three defendants were charged by the SEC with violating antifraud provisions of securities laws, while Patten picked up a charge of breaking market manipulation rules and Coker Sr. and Coker Jr. were charged with aiding and abetting those violations.
Federal prosecutors separately charged the three with securities fraud, conspiracy to commit securities fraud and conspiracy to manipulate securities prices.
Makamer Holdings, the company’s new name following a merger between Hometown International and bioplastics masker Makamer in April, did not immediately respond to a Forbes request for comment.
Tangent
Patten and Coker Sr. were arrested and made an initial appearance in a North Carolina court on Monday, according to CNBC. Coker Jr., who resides in Hong Kong according to federal prosecutors, is still at large.
Key Background
Located in the Philadelphia suburb of Paulsboro, New Jersey, Your Hometown Deli came under media attention last year, when Hometown International’s valuation surged to more than $100 million despite the deli only pulling in about $13,000 in annual sales. It was opened by Patten’s friend and his business partner, who were both unaware of the restaurant’s role in the scheme, federal prosecutors said Monday. The stock price surged more than 1,000% from its October 2019 initial public offering to April 2021, and some experts said there was evidence of stock manipulation. Your Hometown Deli closed in June of this year after about eight years in operation, according to SEC filings..
What To Watch For
The criminal securities fraud charges come with a maximum sentence of 20 years in prison if the defendants are found guilty, while the conspiracy charges could lead to up to 5 years in prison. The SEC complaint is seeking to prohibit the three defendants from participating in any penny stock offerings and to bar Coker Jr., who served as chairman of Hometown International’s board, from serving as an officer or director of another public company.
Further Reading
Notorious New Jersey Deli Once Worth Over $100 Million Cut Cold, Closes Doors (Forbes)
The Mystery of the $113 Million Deli (New York Times)
Source: https://www.forbes.com/sites/carlieporterfield/2022/09/26/sec-charges-three-men-with-fraud-over-100-million-new-jersey-deli/