Three men were charged with fraud and other crimes in a scheme involving a company that was worth $100 million in the stock market despite having only a small town deli.
Three men were charged with conspiracy to commit securities fraud. The two men were arrested Monday. The man is still at large.
Four counts of manipulation of securities, four counts of wire fraud, and a count of money-laundering are included in the indictment. The SEC accused the men of manipulating the market.
The business at the center of the investigation was located over the Delaware River from Philadelphia. The deli made less than $40,000 a year and closed earlier this year. A bioplastics company merged with the parent company. Last year, E-Waste merged with another company.
Questions were raised about whether your hometown deli's parent company was following the law after the controversy. The men are accused of being involved in another shell company called E- Waste.
In a letter to clients, investor David Einhorn brought to the attention of the public the 100 million dollar New Jersey deli. CNBC uncovered more information about the company's former CEO, Paul Morina, a legendary high school wrestling coach in southern New Jersey.
The two men charged in the scheme wrestled together in high school. The owners of the deli were persuaded by Patten to put it under the control of an umbrella company.
The deli owners were unaware that Patten and his associates were positioning Hometown International as a vehicle for a reverse merger that would yield substantial profit to them.
The OTC marketplace is where shares of small companies are traded.
The scheme was to gain control of the management and the shares from the deli owners. Prosecutors said that the men took control of another company. Even though it didn't have any real business, the company's shares surged.
The tactics artificially inflated the values of Hometown International and E-Waste.
As of last year, he couldn't act as a broker or associate with broker-dealers. He was disciplined multiple times by the Financial Industry Regulatory Authority. He successfully appealed the SEC judge's sanctions in a case where he was accused of manipulating the price of a stock on the stock exchange. Ira Sorkin was best known for his representation of Ponzi scheme king Bernard Madoff.
Penalties and fines will be imposed on the Cokers and Patten. The maximum penalty for securities fraud and securities price manipulation is 20 years in prison. The wire fraud count has a maximum penalty of 20 years in prison. Each conspiracy to commit securities fraud and conspiracy to manipulate securities prices has a maximum penalty of 5 years in prison.
The Coker family is made up of Coker Jr. and Sr. CNBC reported on their business dealings.
The full indictment can be found here.
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