In a shocking turn of events, ex-convict James Patten, a resident of North Carolina, has pleaded guilty to securities fraud charges in connection with a scheme to manipulate the stock of two publicly traded companies. One of the companies involved, Hometown International, managed to achieve a market capitalization of over $100 million, despite owning just a small, unprofitable deli in Paulsboro, New Jersey. The other company, a shell company called E-Waste, had no tangible assets yet boasted an even higher market cap.

Patten, along with two other individuals, Peter Coker Sr. and Peter Coker Jr., were accused of conspiring over an eight-year period to increase the stock prices of Hometown International and E-Waste. This was done in order to create a false impression of demand for the shares and position the companies for potential reverse mergers. The scheme relied on coordinated stock trading among a select few accounts held by family members, friends, and associates.

Prosecutors revealed that as a result of this fraudulent activity, the stock prices of Hometown International and E-Waste were artificially inflated by 939% and 19,900%, respectively. The scheme came to light in 2022 after a series of articles by CNBC exposed the questionable connections between the companies, past court issues involving Patten and the elder Coker, and suspicious consulting deals.

While Patten has pleaded guilty to securities fraud and conspiracy charges, the Cokers remain charged in the case and have pleaded not guilty. The Securities and Exchange Commission (SEC) has also filed a lawsuit against all three individuals over the alleged scheme. However, the lawsuit has been paused pending the resolution of the criminal case.

Patten's guilty plea could potentially increase pressure on the Cokers to consider plea deals. Peter Coker Sr., who resides in North Carolina, is currently free on bond, while Peter Coker Jr., a former Hong Kong resident, was apprehended as a fugitive in Thailand and is being held without bond in a New Jersey jail.

Patten, who previously faced 10 securities fraud charges alongside the Cokers, is expected to receive less than the maximum possible sentence of 20 years in prison and fines of $5.25 million due to federal sentencing guidelines. His sentencing is scheduled for April 23. Patten's lawyer, Ira Sorkin, stated that his client admitted to wrongdoing but did not disclose whether Patten will cooperate with prosecutors in their case against the Cokers.

The alleged stock manipulation scheme has drawn attention for its audacity and the media frenzy surrounding it. Lawyers for the Cokers have argued that no one actually lost money in the scheme. However, prosecutors have pointed out the substantial consulting fees paid out by Hometown International and E-Waste, as well as the involvement of other individuals in funding the companies who have not been charged.

This is not the first time Patten has been involved in fraudulent activities. In 2010, he pleaded guilty to a mail fraud charge for sending a false financial statement to cover up bad investments made using a client's money. He was sentenced to 27 months in prison. Additionally, Patten was previously barred by FINRA, the broker-dealer regulator, from acting as a stockbroker due to violations of securities laws and unauthorized trading.

The outcome of this case will undoubtedly shed light on the extent of the fraudulent activities and the potential impacts on investors. As the legal proceedings progress, further details regarding the sentencing and potential cooperation of Patten and the Cokers with prosecutors are expected to emerge.