Judge pauses SEC case in alleged NJ deli stock fraud in favor of criminal probe

A federal judge granted the Justice Department’s request to pause the Securities and Exchange Commission’s civil case regarding alleged fraud involving a small-town New Jersey deli whose parent company was once valued at $100 million in the stock market.

Federal prosecutors had requested earlier in December that the judge postpone the SEC case due to considerable overlap with their criminal litigation. They argued that postponing the civil case would “preserve the integrity” of the prosecution by preventing the defendants from seeing the extent of the government’s evidence against them.

Judge Christine O’Hearn granted that request on Wednesday, stating that there was no opposition from either the SEC or the defendants. The SEC declined to comment beyond public filings.

The decision marks the latest step in the saga of Your Hometown Deli, a now-closed sandwich shop in Paulsboro, New Jersey, which prosecutors allege was used as a pawn for an international market manipulation scheme. It was the sole asset of Hometown International, a company controlled by financiers James Patten, Peter Coker Sr. and Peter Coker Jr. The latter are father and son.

Prosecutors charged the three men with multiple criminal counts in September, alleging that the trio manipulated the market to artificially inflate the values of Hometown International and another shell company, E-Waste. Patten and Coker Sr. were arrested the day the charges were announced, while Coker Jr., who lives in Hong Kong, remains at large. The SEC also unveiled its civil suit against the three men on the same day.

Your Hometown Deli made under $40,000 in annual revenue despite Hometown International’s $100 million market value, according to public filings. Paul Morina, the principal and wrestling coach at Paulsboro High School, opened the deli with his longtime friend Patten in 2014.

Prosecutors say Patten convinced Morina to open the deli under the umbrella of Hometown International. Without Morina’s knowledge, Patten and the Coker father-son duo “began positioning Hometown International as a vehicle for a reverse merger that would yield substantial profit to them,” prosecutors allege.

Earlier this month, prosecutors said they expect to review about two batches of 80,000 documents each by Jan. 27. The court will hold a status conference on those documents Jan. 17.