The Securities and Exchange Commission charged Peter L. Coker Sr., Peter L. Coker Jr., and James T. Patten for their roles in orchestrating fraudulent manipulative securities trading schemes and an indictment unsealed today accused the three men with orchestrating a large-scale market manipulation scheme related to two publicly traded companies.
These schemes included artificially inflating the share price of Hometown International, which operated a New Jersey deli producing less than $40,000 in annual revenue, 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.
According to the SEC’s complaint, 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, China, who was the former Chairman of the Board of Hometown International, took control of the outstanding shares of Hometown International and a separate shell company, E-Waste Corp., artificially inflated the price of both issuers’ stock through manipulative trading and used the entities to acquire privately-held companies in reverse mergers, with the intent to thereafter dump their shares at grossly inflated prices.
Before the defendants were able to reap the intended profits of the schemes, as alleged, numerous news articles were published discussing the issuers’ inflated stock prices.
“We allege that the defendants’ brazen schemes resulted in the artificial inflation of the stock price of two publicly traded companies with little to no annual revenues,” said Scott A. Thompson, Associate Director of Enforcement in the Philadelphia Regional Office. “Such manipulative schemes diminish the trust investors must have in the integrity of the markets, and we will pursue those who engage in such wrongdoing.”
The SEC’s complaint, filed in the U.S. District Court for the District of New Jersey, charges all three defendants with violations of the antifraud provisions of the securities laws. The complaint also charges Patten with violating market manipulation provisions of the securities laws and charges Coker Sr. and Coker Jr. with aiding and abetting those violations. It 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.
In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced criminal charges against Patten, Coker Sr., and Coker Jr., who are each charged 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.
According to U.S. Attorney Philip R. Sellinger, documents filed in this case and statements made in court, Patten, Coker Sr., and Coker Jr. conspired to enrich themselves through a scheme to manipulate securities prices via a pattern of coordinated trading, which injected inaccurate information into the marketplace, creating false impressions of supply and demand for these securities from 2014 through September 2022.
As part of the securities fraud scheme, the defendants targeted two publicly traded companies – Hometown International Inc. and E-Waste Corp. – which were both traded on the OTC Link Alternative Trading System, also known as the OTC Marketplace.
The OTC Marketplace is an alternative trading system that contains three tiers of markets, which are largely based on the quality and quantity of the listed companies’ information and disclosures.
Patten, Coker Sr., and Coker Jr. took steps to gain control of both entities’ management and stock with the ultimate intention of entering reverse mergers, a transaction through which an existing public company merges with a private operating company.
A successful reverse merger would allow the defendants to sell shares of each entity at a significant profit.
In or around 2014, two New Jersey residents began the process of opening a local deli in Paulsboro, New Jersey.
One of the individuals discussed his interest in opening the deli with Patten, a long-time friend, who suggested the creation of Hometown International, an umbrella corporation, under which the deli would operate as a wholly-owned subsidiary.
Unbeknownst to the deli owners, almost immediately after Hometown International was formed, Patten and his associates began positioning the shell company as a vehicle for a reverse merger that would yield substantial profit to them.
Around October 2019, Hometown International began selling shares on the OTC Marketplace. Shortly thereafter, Patten, Coker Sr., And Coker Jr. undertook a calculated scheme to gain control of Hometown International’s management and its shares from the deli owners.
Patten, Coker Sr., and Coker Jr. took similar actions to gain control of E-Waste Corporation’s stock and management.
Once the defendants gained control of Hometown International and E-Waste’s shares, they arranged for the transfer of millions of shares of stock to a number of nominee entities, including entities controlled by Coker Jr., in an effort to mask their control of the shares.
In addition, the defendants transferred shares to family members, friends, and associates and gained control over their trading accounts by obtaining their log-in information in order to conceal the defendants’ involvement.
The defendants then used those accounts to commit a number of coordinated trading events, often referred to as match and wash trades, to trade in Hometown International and E-Waste Corp.’s stock on both sides of the transaction.
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.
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.
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.
Your Hometown Deli in Paulsboro