A man involved in a brazen plot to manipulate the stock price of a New Jersey deli’s parent company pleaded guilty to securities fraud on Wednesday.
James T. Patten, 64, of North Carolina, admitted to orchestrating a series of misleading trades in an apparent bid to enrich himself and two co-defendants in U.S. District Court in Camden, N.J.
Mr. Patten 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. Patten’s lawyer, Ira Lee Sorkin, said in an interview on Wednesday that attention on the case “was exaggerated beyond any perception — that this was some $100 million fraud involving a delicatessen.” He said prosecutors had made “no mention” of any “ill-gotten gains.”
The scheme began around 2014, prosecutors said, when Mr. Patten helped open Your Hometown Deli in Paulsboro, N.J. The shop sold Philadelphia cheesesteak sandwiches, groceries and other ready-to-eat food, according to regulatory filings.
Around 2019, Mr. Patten and two associates — Peter Coker Sr. and Peter Coker Jr. — “undertook a calculated scheme” to gain control of the deli’s parent company, Hometown International, the U.S. attorney’s office in New Jersey said.
The group used accounts owned by others to make coordinated trades using stock from Hometown International and E-Waste, another company the three men controlled. This gave “the false impression that there was genuine market interest in the stock,” causing its price to surge, the U.S. 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 small deli made just $13,976 in revenue.
“The pastrami must be amazing,” wrote David Einhorn, a hedge fund manager, in a memo to investors after noticing the soaring price and issuing a warning about frothy stock market conditions.
E-Waste’s stock was inflated 19,900 percent, the U.S. attorney’s office said.
News of Your Hometown Deli’s sky-high value reached 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.