How a Wall Street Trader Manipulation Made the World’s Most Expensive Deli at $113M Market Cap.
For the Deli gang, the cafeteria of a federal prison is on the horizon.
For those who don't know, Deli is short for Delicatessen. It's a warm, no-fuss place where you can eat in or take out items such as sandwiches, salads, soups, omelets, meats, and cheeses. In Paulsboro, New Jersey, the Your Hometown Deli, with $40,000 in revenue per year, reached a valuation of $113 million amid the COVID-19 crisis in 2020.
The deli was the sole asset of Hometown International, a company listed on a lightly regulated segment of Wall Street, just one notch above the over-the-counter, the least regulated of all ... and thus a crook's paradise.
The company's stock price had mysteriously jumped from $1 to $14, giving the modest “Your Hometown Deli” the value of several three-star restaurants. Peter Coker, 80, his son Peter Coker Jr., 53, and James Patten, 63, are the trio behind this feat. The Securities and Exchange Commission (SEC) has just charged them with a dozen counts of fraud, manipulation, and money laundering …
From North Carolina to Macao, they are suspected of having orchestrated an artificial rise in the share price to the detriment of small shareholders.
Catch and stratagems
In 2014, James Patten helped a friend of his, the local high school wrestling teacher, open his Deli in New Jersey. The financier, who works for Peter Coker's fund, decides to create a holding company, Hometown International, which owns the Deli.
In 2019, they take it public, initially on the less scrutinized and regulated segment, the over-the-counter. The situation quickly escalates. The trio and their connections take control of the company through opaque transfers of shares in various shell companies and nominees. They manipulate its accounts to transfer it into a market segment that is a little more prestigious and less connoted than the over-the-counter market. This allows them to have access to more investors.
With accomplices, they create fictitious transactions between them to give the illusion of investor interest in their stock. The scheme works and smallholders buy the stock, which soars due to its low liquidity. The SEC did not disclose the amount of money the trio and their accomplices are suspected of having pocketed by selling their shares at ever higher prices.
Fancy accounts
David Einhorn, the hedge fund specializing in short selling and activism, mentions this case of blatant manipulation, a sign of investor irrationality, in one of his quarterly letters to his clients. Matt Levine, one of Bloomberg's star columnists, follows suit and takes the trouble to dissect the company's annual report where, on every page, the deception is obvious. The publication of one of his columns in April 2021 reveals the fanciful accounts of Hometown International.
She had spent only $126 in personal expenses for the whole of 2020 when her sales had peaked at $14,000, the Deli being closed for six months due to the COVID-19 crisis.
The trio was moved by this article and decided to change the name of their company to make themselves forget. In 2022, the company merged with an unlikely bioplastics company, Makamer, but it was already too late: the American authorities were on track of the trio. James Patten and Peter Coker were arrested by federal agents in September 2022, unlike Peter Coker Junior, who resides in Hong Kong.
For the Deli gang, the cafeteria of a federal prison is on the horizon.
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