Amazing pastrami: SEC finally charges “$100 million worth” New Jersey Deli with fraud

Rick Steves

“The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing”, said hedge fund manager David Einhorn in a letter to clients in April 2021.

The Securities and Exchange Commission has charged Peter L. Coker Sr., Peter L. Coker Jr., and James T. Patten for their roles in fraudulent manipulative securities trading schemes related to the infamous New Jersey deli that saw its market capitalization being grossly inflated to $100 million.

The NJ Deli, named Hometown International, produced less than $40,000 in annual revenue, but saw its share price inflate artificially from approximately $1 per share in October 2019 to nearly $14 per share by April 2021.

According to the complaint, father and son 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.

“The pastrami must be amazing”

The story about the New Jersey deli becoming a $100 million worth company became a media sensation in 2021 as the pandemic saw the overall equities markets shoot up for the stars. The case of Hometown International, however, was unsuprisingly a fraudulent scheme.

The truth is that the SEC was already on to them since 2015, when Hometown intended to go public and the regulator warned Hometown that it believed that the company was a shell company. Hometown’s leadership objected, stating that it was operating a delicatessen and that it was investing in food preparation and service.

Hedge fund manager David Einhorn published a letter to clients in April 2021 warning that retail investors were at risk from inflated valuations of publicly-traded companies and pointed to the example of Hometown International: “The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing.”

Following the news media coverage, the OTC Markets Group delisted Hometown’s stock from its OTCQB market “for not complying with the rules” and marked it as CE, for caveat emptor. The OTC placed a skull and crossbones icon next to Hometown’s stock symbol as a warning that investors should exercise care before investing in a stock marked CE.

The deli closed on June 19, 2022.

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