The US$100 million deli was, in fact, a securities fraud, U.S. authorities are alleging.

A 12-count indictment was unsealed Monday charging three men — James Patten, Peter Coker Sr. and Peter Coker Jr. — with securities fraud, conspiracy and conspiracy to manipulate markets in connection with an alleged market manipulation scheme involving two public companies.

Patten, a former stockbroker, was also charged with wire fraud, money laundering and securities manipulation.

In a separate civil action, the U.S. Securities and Exchange Commission (SEC) filed civil charges against the three men for alleged market manipulation.

According to court filings, the trio secretly took control of a company, Hometown International Inc., that was traded over-the-counter and was started to serve as a holding company for a New Jersey-based deli.

Through wash trading and other alleged forms of manipulation, the three men artificially inflated the company’s stock price by 939%, authorities alleged.

It’s also alleged that they took control of another firm, E-Waste Corp., and drove its price up 19,900%.

“These schemes included artificially inflating the share price of Hometown International, which operated a New Jersey deli producing less than US$40,000 in annual revenue, from approximately US$1 per share in October 2019 to nearly $14 per share by April 2021, leading to a grossly inflated market capitalization of US$100 million,” the SEC alleged.

According to authorities, the goal of the schemes was to execute reverse takeover transactions that would allow them to cash out of their inflated shares. However, the alleged scheme was exposed before those transactions could be completed.

“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,” said Scott Thompson, associate director of enforcement in the SEC’s Philadelphia office.

Patten and Coker Sr. were arrested today and are scheduled to appear in federal court. Coker Jr., who lives in Hong Kong, remains at large.

The SEC’s complaint, filed in the U.S. district court for in New Jersey, seeks injunctive relief, disgorgement plus prejudgment interest, civil penalties and market bans.

None of the allegations have been proven, and the three are presumed innocent of the criminal charges.