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NJ Deli scheme leads to guilty plea to securities fraud

NJ Deli scheme leads to guilty plea to securities fraud

A man involved in a brazen conspiracy to manipulate the stock price of a New Jersey daily's parent company pleaded guilty to securities fraud on Wednesday.

James T. Patton, 64, of North Carolina, admitted in U.S. District Court in Camden, NJ, to conducting a series of apparently deceptive trades to enrich himself and two co-defendants.

Mr. Patton faces up to 20 years in prison and a fine of up to $5 million for securities fraud. He also pleaded guilty to a charge of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a fine of up to $250,000.

Mr. Patton's lawyer, Ira Lee Sorkin, said in an interview on Wednesday that the attention to the case had been “exaggerated beyond any notion — that this was a nearly $100 million fraud involving a gourmet delicacy.” He said prosecutors made “no mention” of any “ill-gotten gains.”

The scheme began around 2014, prosecutors said, when Mr. Patton helped open Your Hometown Deli in Paulsboro, N.J. The shop sold Philadelphia cheesesteak sandwiches, groceries and other ready-to-eat meals, according to regulatory filings.

Around 2019, Mr. Patton and two associates — Peter Coker Sr. and Peter Coker Jr. — “conceived a deliberate plan” to gain control of Deli's parent company, Hometown International, the U.S. attorney's office in New Jersey said.

The group used accounts owned by others to conduct coordinated trading using the stock of Hometown International and E-West, another company controlled by the three men. This “created the false impression that there was genuine market interest in the stock”, causing its price to rise, the US attorney's office said.

The scheme caught the attention of traders in 2021 when Hometown International's value soared to $113 million, even though the smaller deli made only $13,976 in revenue.

“Pastrami must be amazing,” hedge fund manager David Einhorn wrote in a memo to investors after watching prices rise and issuing a warning about frothy stock market conditions.

The U.S. attorney's office said E-Waste's stock had soared 19,900 percent.

News of your hometown deli's exorbitant valuation hit front pages around the world as investors warned it could be a scam.

Sentencing is scheduled for April 23. The elder Mr. Coker, who was arrested in late 2022, is awaiting trial. His son was arrested in January.

https://static01.nyt.com/images/2023/12/20/multimedia/20xp-NJDeli/20xp-NJDeli-facebookJumbo.jpg

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