DOJ indicts trio over coordinated market manipulation that fraudulently drove stock price of small deli over $100 million

A massive scheme involving fraud and market manipulation was just revealed in a federal indictment that resulted in a small local delicatessen being valued at more than $100 million.

The three men who took part in that scheme now face multiple federal charges that, if convicted, could land them behind bars for decades and cost them millions in fines, the Daily Wire reported.

The $113 million deli

According to a Justice Department news release, the three alleged fraudsters — two live in North Carolina, while the third lives in Hong Kong — face 12 counts each that include conspiracy, securities fraud, and the manipulation of securities prices, while one of the individuals faces additional charges that include wire fraud and money laundering.

At the center of the scheme was a small local deli in New Jersey that was opened in 2014 by friends of one of the indicted individuals that was shortly thereafter converted into a wholly-owned subsidiary of an umbrella company known as Hometown International, per the federal indictment.

The owners of the original deli that became Hometown International were eventually bought out by the defendants, who had also created another shell company known as E-Waste Corporation.

Those two shell companies were then used to engage in reverse mergers, in which other companies with actual value were purchased and, thereafter, millions of shares were spread out among numerous other entities that were all owned or controlled to an extent by the same three individuals.

That is when the manipulation of stock prices began as coordinated transactions were made involving the various controlled entities that created a false appearance of market demand and artificially drove the stock prices up.

At one point, according to the Daily Wire, the small local deli that did only modest business was reportedly valued at more than $113 million while the E-Waste company, which did no actual business, reached $110 million in purported value.

“Brazen schemes”

In addition to being criminally charged by the DOJ, the three men are also facing antifraud charges over the alleged manipulation from the Securities and Exchange Commission, per a press release on Monday.

“We allege that the defendants’ brazen schemes resulted in the artificial inflation of the stock price of two publicly traded companies with little to no annual revenues,” Scott Thompson, associate director of enforcement at the SEC’s Philadelphia office, said in the statement.

He added, “Such manipulative schemes diminish the trust investors must have in the integrity of the markets, and we will pursue those who engage in such wrongdoing.”

If convicted on the SEC charges, the defendants would be compelled to give up any ill-gotten profits plus interest, pay other civil penalties, and be barred from serving as executives in other companies or engaging in future stock transactions.

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