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Federal prosecutors ask judge to postpone SEC case in alleged New Jersey deli stock fraud

Hometown Deli, Paulsboro, N.J.

Mike Calia | CNBC

Federal prosecutors in New Jersey need the Securities and Alternate Fee to postpone its civil case in opposition to the alleged masterminds behind a $100 million fraud scheme involving a small-town deli so it will not get in the way in which of their ongoing prison case. 

Prosecutors for the District of New Jersey filed a movement on Wednesday saying the SEC’s case “considerably” overlaps with their ongoing prison case and the civil matter must be postponed till the litigation, together with a possible trial, is accomplished, courtroom data present. 

Suspending the civil case would “protect the integrity” of the continued prosecution by stopping the defendants from seeing the extent of the federal government’s proof in opposition to them, federal prosecutors argued within the submitting. 

Through the discovery section of civil and prison issues, defendants have the power to see the proof that is going for use in opposition to them in trial however they’ve entry to much more supplies in civil issues as a result of the confines are broader. 

The SEC and the attorneys for the suspects consented to the request, which is widespread in such circumstances. Choose Christine O’Hearn has but to rule on the matter. 

A phone convention is scheduled within the prison case for Dec. 14, but it surely’s anticipated to be principally procedural and a possibility for the prosecutors and protection attorneys to replace the decide on the standing of the litigation. 

In September, James Patten and father-and-son duo Peter Coker Sr. and Peter Coker Jr. have been arrested and charged with securities fraud for allegedly orchestrating a scheme that inflated the costs of two publicly traded corporations, Hometown Worldwide and E-Waste Corp, a shell firm.

Courtroom sketch of James Patten, left, and lawyer Ira Sorkin at N.J. District Court docket in Camden, N.J., Oct. 11, 2022

Supply: Elizabeth Williams

Makamer, a bioplastics startup, merged with Hometown Worldwide, earlier this year.

Regardless that Hometown Worldwide’s solely asset was Your Hometown Deli, a now-closed tiny sandwich store in Paulsboro, New Jersey, that had below $40,000 in annual income, the trio used manipulative buying and selling to inflate its market capitalization to greater than $100 million, prosecutors alleged. 

The scheme started when Patten satisfied the proprietor of Your Hometown Deli, esteemed native highschool wrestling coach and principal Paul Morina, to place the restaurant below the management of Hometown Worldwide, an umbrella firm they created, prosecutors alleged

“Unbeknownst to the deli house owners, virtually instantly after Hometown Worldwide was fashioned, Patten and his associates started positioning Hometown Worldwide as a automobile for a reverse merger that may yield substantial revenue to them,” prosecutors mentioned beforehand in a information launch. 

“Shortly thereafter, Patten, Coker Sr., and Coker Jr. undertook a calculated scheme to realize management of Hometown Worldwide’s administration and its shares from the deli house owners.”

Peter Coker Sr. and his spouse, Susan Coker, at N.J. District Court docket in Camden, N.J., Oct. 11, 2022

Supply: Jerry Frasier and Vinny Castaldo

The boys concocted the same scheme to take management of E-Waste. The techniques “artificially inflated” the values of Hometown Worldwide and E-Waste inventory by 939% and 19,900%, respectively, prosecutors mentioned. 

Coker Sr. and Patten have pleaded not guilty.

Patten’s lawyer Ira Sorkin, the high-profile litigator who as soon as repped the infamous Ponzi scheme fraudster Bernie Madoff, did not remark when requested whether or not the case is anticipated to go to trial. 

Coker Sr.’s lawyer Marc Agnifilo, who beforehand defended “pharma bro” Martin Shkreli and disgraced film producer Harvey Weinstein, could not be reached. It is not clear whether or not the Hong Kong-based Coker Jr. has an lawyer, and he remains a fugitive. Morina did not reply to a request for remark. 

Patten, Coker Sr. and Coker Jr. have been charged somewhat over a 12 months after Hometown Worldwide’s doubtful inventory was revealed by hedge fund manager David Einhorn in a letter to purchasers warning of the risks retail buyers face. 

“Somebody pointed us to Hometown Worldwide (HWIN), which owns a single deli in rural New Jersey … HWIN reached a market cap of $113 million on February 8. The biggest shareholder can also be the CEO/CFO/Treasurer and a Director, who additionally occurs to be the wrestling coach of the highschool subsequent door to the deli,” Einhorn mentioned within the April 2021 letter. “The pastrami have to be superb.”

After information of the indictment broke, he quipped on Twitter: “I assume the Pastrami wasn’t so nice.”

The $100M company that only owns a New Jersey deli with $35,000 in sales over the last two years

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