Monday, September 26, 2022

Three Men Charged with International Market Manipulation Scheme

 

 An indictment unsealed today charges three men with orchestrating a large-scale market manipulation scheme related to two publicly traded companies, U.S. Attorney Philip R. Sellinger announced.

James Patten, 63, of Winston-Salem, North Carolina; Peter Coker Sr., 80, of Chapel Hill, North Carolina; and Peter Coker Jr., 53, of Hong Kong, China, are each charged in a 12-count indictment with conspiracy to commit securities fraud, securities fraud, and conspiracy to manipulate securities prices. Patten is also charged with four counts of manipulation of securities, four counts of wire fraud, and one count of money laundering.

Patten and Coker Sr. were arrested today and are scheduled to appear before U.S. Magistrate Judge L. Patrick Auld in federal court in the Middle District of North Carolina. They will appear in court in the District of New Jersey at a date to be determined. Coker Jr. remains at large.

According to documents filed in this case and statements made in court:

From 2014 through September 2022, Patten, Coker Sr., and Coker Jr. conspired to enrich themselves through a scheme to manipulate securities prices via a pattern of coordinated trading, which injected inaccurate information into the marketplace, creating false impressions of supply and demand for these securities.

 As part of the securities fraud scheme, the defendants targeted two publicly traded companies – Hometown International Inc. and E-Waste Corp. – which were both traded on the OTC Link Alternative Trading System, also known as the OTC Marketplace. The OTC Marketplace is an alternative trading system that contains three tiers of markets, which are largely based on the quality and quantity of the listed companies’ information and disclosures.

Patten, Coker Sr., and Coker Jr. took steps to gain control of both entities’ management and stock with the ultimate intention of entering reverse mergers, a transaction through which an existing public company merges with a private operating company. A successful reverse merger  would allow the defendants to sell shares of each entity at a significant profit.

In or around 2014, two New Jersey residents began the process of opening a local deli in Paulsboro, New Jersey. One of the individuals discussed his interest in opening the deli with Patten, a long-time friend, who suggested the creation of Hometown International, an umbrella corporation, under which the deli would operate as a wholly owned subsidiary. Unbeknownst to the deli owners, almost immediately after Hometown International was formed, Patten and his associates began positioning Hometown International as a vehicle for a reverse merger that would yield substantial profit to them.

Around October 2019, Hometown International began selling shares on the OTC Marketplace. Shortly thereafter, Patten, Coker Sr., And Coker Jr. undertook a calculated scheme to gain control of Hometown International’s management and its shares from the deli owners. Patten, Coker Sr., and Coker Jr. took similar actions to gain control of E-Waste Corporation’s stock and management.

Once the defendants gained control of Hometown International and E-Waste’s shares, they arranged for the transfer of millions of shares of stock to a number of nominee entities, including entities controlled by Coker Jr., in an effort to mask their control of the shares.

In addition, the defendants transferred shares to family members, friends, and associates and gained control over their trading accounts by obtaining their log-in information in order to conceal the defendants’ involvement. The defendants then used those accounts to commit a number of coordinated trading events, often referred to as match and wash trades, to trade in Hometown International and E-Waste Corp.’s stock on both sides of the transaction.

These tactics artificially inflated the price of Hometown International and E-Waste’s stock by giving the false impression that there was a genuine market interest in the stock. Their scheme had the ultimate impact of artificially inflating Hometown International’s stock by approximately 939 percent and E-Waste’s stock by approximately 19,900 percent.

The securities fraud and manipulation of securities prices counts each carry a maximum penalty of 20 years in prison and a $5 million fine. The wire fraud and money laundering counts are punishable by a maximum penalty of 20 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greatest. The counts of conspiracy to commit securities fraud and conspiracy to manipulate securities prices both carry a maximum penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the offense whichever is greatest.

In a separate civil action, the Securities and Exchange Commission today filed a complaint in the District of New Jersey charging Patten, Coker Sr., and Coker Jr. based on the allegations underlying the market manipulation scheme.

U.S. Attorney Sellinger credited special agents of the FBI’s Philadelphia Division, under the direction of Special Agent in Charge Jacqueline Maguire, and special agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Tammy Tomlins in Newark, with the investigation. He also thanked special agents from FBI Charlotte, FBI Los Angeles, FBI San Francisco, FBI Denver, and FBI Knoxville, for their assistance.

The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

No comments:

Post a Comment