[HN Gopher] SEC charges owners of New Jersey Deli with a $100M V...
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SEC charges owners of New Jersey Deli with a $100M Valuation
Author : nwsm
Score : 107 points
Date : 2022-09-27 18:51 UTC (4 hours ago)
(HTM) web link (www.sec.gov)
(TXT) w3m dump (www.sec.gov)
| crorella wrote:
| Relevant in the Trump case, as they are being charged for the
| same thing and they were complaining of political persecution
| since they were the only one being charged for that. Well, not
| anymore.
|
| EDIT: Context - https://www.wsj.com/podcasts/the-journal/people-
| of-the-state...
| [deleted]
| lifeisstillgood wrote:
| >>> diminish the trust investors must have in the integrity of
| the markets,
|
| It's interesting the use of the phrase "investors". I say this
| because there is a difference between "the public in general" and
| "investors" having faith in "the markets".
|
| As we go into a downturn (over here the UK feels like Slim
| Pickens clinging on the bomb and whooping as we fall), we need to
| be careful about whose market is being protected.
|
| I think I am saying that even if the SEC is making sure no-one at
| the poker table is dealing from the bottom, there are millions
| who are not at the table, and millions more who feel the whales
| are taking way more than they should be able to.
|
| If most people feel they are getting screwed, saying "we protect
| the integrity of the market" might not help.
| tarakat wrote:
| No matter what your opinion on economic equality, letting
| fraudsters profit at the expense of their more honest
| counterparts harms the economic health of a country. Eventually
| workers will feel it too.
| SllX wrote:
| It's not that interesting. Investors are the ones who are
| concerned with the financial markets and that's everyone with
| money staked in the financial markets.
|
| The SEC is a bunch of working stiffs too but their assembly
| line is the integrity of the US financial markets. Anything
| outside of that is beyond their jurisdiction.
| [deleted]
| JumpCrisscross wrote:
| > _there are millions who are not at the table, and millions
| more who feel the whales are taking way more than they should
| be able to_
|
| This is not the SEC's remit. To the degree it's anyone's remit,
| it's the Fed, Treasury and the CFPB's job.
| lifeisstillgood wrote:
| I think it's wider than that - we really are talking about
| how to share the wealth of all society with all its citizens.
|
| But yes, it's why we cannot hope to leave it to the SEC or
| the Fed. The UK just learnt what happens when the Government
| and the central bank disagree on even the most basic
| questions.
| alistairSH wrote:
| Or, possibly Congress' job, as they set tax policy. Prior to
| the 1980s, we taxed the whales out of existence. Perhaps not
| a direct cause/effect, but at the same time that we've
| reduced the top marginal rate from 70%+ to 37%, we've seen a
| more unequal income and wealth distribution.
| 2OEH8eoCRo0 wrote:
| Everyone with a retirement account is an investor. Everyone
| with a pension is an investor. The public _are_ investors.
| throawaygao1 wrote:
| Was it ever possible to give every boomer's kids huge amounts
| of money grown faster than inflation, for no work?
| JumpCrisscross wrote:
| > _Was it ever possible to give every boomer 's kids huge
| amounts of money grown faster than inflation, for no work?_
|
| "For no work" describes crypto. Stock represents interest
| in working companies. Real economic growth is real.
| Distributing that growth is possible. "Huge" is subjective,
| but fundamentally, the answer to your question is yes,
| minus "for no work."
| adolph wrote:
| > "For no work" describes crypto.
|
| Some crypto, like proof of stake, yes. Other crypto is
| based on proof of work.
| ikiris wrote:
| This is a strawman level definition of "work"
| missedthecue wrote:
| I think they mean productive economic activity.
| claytongulick wrote:
| > boomer's
|
| I don't appreciate your use of a derogatory term referring
| to age.
| ceejayoz wrote:
| This post perhaps deserves the lightly-derogatory use
| "OK, Boomer", but the term _itself_ is hardly derogatory.
| It 's a well-accepted term for a particular age group of
| the American public, used widely by the Census (https://w
| ww.census.gov/library/stories/2019/12/by-2030-all-b...),
| the CDC (https://www.cdc.gov/aging/publications/features/
| caregivers-b...), and Social Security Administration
| (https://www.ssa.gov/policy/subjects/demographics-baby-
| boomer...).
| edgyquant wrote:
| It didn't use to be a derogatory remark
| edgyquant wrote:
| The point of controlled inflation is to ensure this isn't
| possible.
| Meekro wrote:
| Since your comment is only tangential to the story, it feels
| like this is something you just wanted to get off your chest.
| But now that we're here, let's explore it further: what kinds
| of changes would satisfy you?
|
| If it's about making it easier to invest in the stock market,
| then what's so hard about it now? Lots of non-rich people are
| in it now (especially if you count retirement funds), and
| investing in index funds is an easy way to get a historically
| reliable 8% return.
|
| If it's about rich people not paying their fair share of taxes,
| then how much would be enough? Is it a certain percentage, or a
| certain compliance rate, or just until you stop hearing from
| the New York Times about how this-or-that company is paying too
| little? By the way, if it's about this, I'd encourage you to
| make friends with a company owner in the $1-10 million per year
| range. Ask them about how much tax they pay, and how much time
| and money they spend on compliance. Ask how their tax rate
| compares to their secretary.
|
| You were kind of vague, so I'm only guessing here-- apologies
| if I'm way off the mark!
| mw888 wrote:
| Now quell our concerns with the same rhetoricals but in the
| top 0.1% range, like for, say, Amazon.
| Meekro wrote:
| The top 0.1%? You are never going to beat them, and you
| know it. They will ignore or sidestep your laws, and most
| of the time they'll get away with it. This will,
| occasionally, produce a left-wing movement and sweep some
| politicians into power. They'll come in with a popular
| mandate, and they'll pass some laws or restructure the IRS
| or something.
|
| Five years later, that top 0.1% will _still_ be dodging
| taxes. Naturally, not a single one of them will have been
| held accountable or gone to jail. However, the resources
| provided by the popular movement will have been used to
| audit and harass the $1-10 million businesses and
| individuals.
|
| Some of them will have been cheating a little. Maybe a
| personal vacation deducted as a business expense -- stuff
| like that. Nothing compared to what Amazon is doing, of
| course. But they'll be audited, and they'll be nailed. Most
| of them will may a major fine. A few will do 1-3 years in a
| Federal minimum security prison.
|
| Or maybe they'll catch a grandma who inherited a European
| bank account from her family. She didn't dodge any taxes,
| but she didn't know that she was supposed to report that
| account every year on a special form. When she later amends
| her filings to comply with the law, they'll take her
| amended filing as a confession and nail her for $2 million,
| or half the value of the account. [1]
|
| But forget about her, it's time to hire another 87,000 IRS
| agents. Does anyone _really_ think they 'll be used to go
| after Amazon?
|
| [1] https://ij.org/case/foreign-bank-account-fines/
| xapata wrote:
| > I'd encourage you to make friends with a company owner in
| the $1-10 million per year range.
|
| To be fair to the person you replied to, I think we can
| assume this kind of company was not the category they were
| thinking of. Many companies with less than $10 million annual
| revenue are struggling to stay afloat.
| Meekro wrote:
| I think that's fair. Still feels like it's not the real
| problem, though. GP says "most people feel they are getting
| screwed" -- I don't think improving Amazon's tax compliance
| (to quote another commenter who replied to me) is going to
| change that. Even if a new-and-improved IRS could force
| Amazon and its ilk into 100% compliance, I'm pretty sure
| everyone would feel just as screwed as they do now.
| xapata wrote:
| > most people feel they are getting screwed
|
| For a moment, I had trouble remembering whether that
| assertion was in the context of getting screwed by the
| government or by freeloaders. I think to avoid people
| feeling screwed, we'd need to focus the conversation on
| what people receive from the government rather than what
| they or others give.
| boeingUH60 wrote:
| The stock market is a rich man's game. Small time, retail
| investors who think they know what they're doing almost always
| get burned in the end.
|
| In my opinion, most small-time traders have no business being
| in the stock markets in the first place, except if it's
| relatively safe index funds administered by the likes of
| Vanguard and BlackRock.
| namdnay wrote:
| You kind of contradicted your first paragraph at the end :)
|
| Small time investors who know what they're doing have been
| buying index funds for the past 40 years and making great
| returns
| themitigating wrote:
| You can't invest if you don't have any extra money.
| nwsm wrote:
| For reference, here [0] is the HN thread about this deli from a
| year ago when the story of the deli went viral.
|
| [0] https://news.ycombinator.com/item?id=26836367
| neaden wrote:
| While this one went pretty ridiculously big and so got attention,
| I wonder how many small versions of this exist, claiming a
| valuation of a million or two and slip under the radar.
| themagician wrote:
| There are probably thousands, if not tens of thousands, of
| schemes and scams going on like this at any given time. They
| happen so often because there is so little enforcement. The SEC
| only goes after the most egregious offenders.
|
| And what a lot of people don't realize is that the SEC can not
| bring criminal charges... which is what most people think of
| when they read, "SEC charges." But the SEC can only bring civil
| action. While they can recommend a case to the DOJ, they rarely
| do. Maybe someone else knows why? Because I don't.
|
| With $40,000 in real revenue, this is a case of people with
| nothing to lose. They bet big and lost. The penalty is
| basically go back to zero... which is pretty close to where
| they started.
|
| One of the reasons I truly believe (perhaps misguided) in more
| equitable distributions of wealth is that I believe it would
| massively cut down on scams... of which everything seems to be
| these days. If people were not so desperate, and they risked
| losing something (UBI, their benefits, and the quality if life
| that could provide, etc.) maybe every other thing wouldn't be a
| freaking scam or scheme of some sort.
|
| Disclaimer: I have become extremely jaded, particularly in the
| post-COVID world. I see a new coffee shop open up and I
| instantly start to wonder, "What manner of scam is going on
| here?"
| JumpCrisscross wrote:
| > _penalty is basically go back to zero_
|
| Penultimate paragraph: "in a parallel action, the U.S.
| Attorney's Office for the District of New Jersey announced
| criminal charges against Patten, Coker Sr., and Coker Jr."
| Sohcahtoa82 wrote:
| > The penalty is basically go back to zero
|
| Worse than that. They're facing criminal charges. If they get
| thrown in prison for a couple years, I'd argue they don't
| just go back to zero, they go negative. It's hard to get a
| job with a criminal record that includes fraud.
| lancesells wrote:
| > If people were not so desperate, and they risked losing
| something Do you think the not so desperate perpetuate fraud
| any less than the desperate? How many wealthy people like
| Gary Vee are out there selling NFTs to kids and the
| impressionable?
| greggsy wrote:
| A business with a million dollar real estate asset attached is
| not at all uncommon today, but it absolutely would be
| happening.
| rubiquity wrote:
| I also saw in the news today that the MoviePass executives are
| being sued by the SEC. Nothing like a correction to bring about
| the prosecution of the previous run up's fraudsters!
| ISL wrote:
| It takes a long time to bring legal proceedings. If you're
| accustomed to seeing high-profile prosecutions of highest-
| flying debacles appear somewhat after the peak of any
| exuberance, that can be readily explained by simple phase-
| delay.
| at-fates-hands wrote:
| In case someone is interested in the MoviePass details:
|
| https://www.businessinsider.com/former-moviepass-executives-...
| yalogin wrote:
| Is this that different from a SPAC?
| JumpCrisscross wrote:
| > _Is this that different from a SPAC?_
|
| SPACs are reverse mergers with bells and whistles. Reverse
| merger just means a private company mergers with a public
| company, the shell, where the motivation for merging is that
| the shell is public.
|
| Shells are usually vestiges of a failing or failed company.
| They went public because they thought they would idk sell
| sandwiches, they didn't sell enough sandwiches, so now their
| most valuable asset is the listing itself. When they are
| bought, there is no cash or goodies for the new owner to
| control. If anything, the less there the better.
|
| SPACs go public with the _ex ante_ intent of merging with a
| private company. When they merge, they dangle the promise of
| their pool of cash to potential acquirers. It 's more
| deliberate, complicated and lucrative (for the bankers).
| mercy_dude wrote:
| I would have more faith in SEC trying to protect the "integrity
| of the market" when they pursue all the Congressman and their
| family cronies actively using insider information to trade.
| uup wrote:
| That's legal so I'm not sure what the SEC can do about that.
| qbasic_forever wrote:
| It's legal, that's the sad thing and why there is no action
| against it until congress takes action to make it illegal. Yes
| there is a massive conflict of interest there.
| jjtheblunt wrote:
| I think
|
| https://www.congress.gov/bill/117th-congress/house-bill/2655
|
| is currently aimed at this problem.
| williape wrote:
| And the excellent Planet Money podcast on the same:
| https://www.npr.org/2021/05/05/993754418/planet-money-the-10...
| vishnugupta wrote:
| There is a (as usual) great take by Matt Levine[1] when SPACs
| were in rage just after which regulators began clamping down on
| SPAC route of taking companies public.
|
| [1]
| https://www.bloomberg.com/opinion/articles/2021-04-30/hometo...
| _HMCB_ wrote:
| And to think I almost had Jersey Mike's tonight. At $100 mill,
| these have got to be tasty subs.
| Animats wrote:
| If they'd inflated the valuation of some crypto thing, they'd
| have the crypto crowd cheering them on. But they did it with
| something people understand, a deli. So it's obvious the value
| was inflated.
|
| The SEC brings the hammer down on about two crypto scams a month.
| This month, Sparkster, Ltd., and Chicago Crypto Capital, Inc.
| Last month, Dragonchain, Bloom, and Crypto Crusaders.
|
| The SEC is still working on the crypto scams of 2018-2019.
| Remember Initial Coin Offerings? There's a big backlog of those.
| So they haven't gotten to NFTs and DeFi yet. Soon, though. The
| SEC just doubled their crypto enforcement staff.
|
| With NFTs, if you sell something that already exists, it's a
| collectable. That's probably OK. If you sell something that
| doesn't exist yet, such as metaverse land for a metaverse that
| isn't running, that's probably not OK. That's a security
| offering. See "Howey Test".
| Tenoke wrote:
| For some people here everything is about how crypto is bad.
| acjohnson55 wrote:
| Nah, only 95% of it.
|
| Look, there are plenty of technologists who are very into
| crypto. You can find lots of them here.
|
| But to many, it reeks of some long-reviled parts of the tech
| scene: vaporware and marketing hype. And that's before you
| get into the astounding levels of fraud and waste.
|
| At this point, crypto is much more of a social phenomenon
| than a technological one. That's not a problem in itself. The
| issue is that foundation is one where legimately interesting
| technology is neither necessary nor sufficient to solve very
| many real-world problems, but the financialization at the
| core of it facilitates these collective delusions that it is.
|
| Everyone's LARPing the original dotcom bubble, but the
| world's entirely different. The dotcom bubble certainly had
| its crackpots, but it also had a lot of people who accurately
| saw that pervasive networking was going to unlock massive
| opportunity. But the low hanging fruit has been plucked over
| the past 25 years.
|
| Web3 people are trying to tell the world that a decentralized
| permissionless log is as the same magnitude of technological
| impact, and it simply isn't.
| roflc0ptic wrote:
| It's a tech site; there's a whole tech industry devoted to
| what is basically securities fraud, and it's annoying. I work
| in smart contracts trying to build an ambitious global
| network, so I'm not exactly some Luddite afraid of the
| future.
|
| If I read an article about people artificially inflating the
| price of something in a pump and dump scheme, I pattern match
| that to crypto. I'm tired of hearing about it, too, but I to
| stop hearing about it because someone regulated the
| fraudsters out of business, not because defrauding
| unsophisticated people became a norm we don't criticize.
| wmf wrote:
| _The SEC is still working on the crypto scams of 2018-2019._
|
| One problem with this narrative is that they managed to kill
| off Kik/Kin and Telegram TON _before they launched_ but they
| let other pump and dumps play out. Clearly it 's possible for
| the SEC to do their job effectively but they just aren't doing
| it.
|
| (Not to mention Libra/Diem which was an outlier.)
| HWR_14 wrote:
| Alternatively, the SEC can do their job but don't have the
| necessary tech-savvy manpower to do it enough.
| TakeBlaster16 wrote:
| Is it tech-savvy people they need? The Howey test doesn't
| say anything about tech or computers. I would have guessed
| they need finance-savvy lawyers.
| ajross wrote:
| I don't follow the logic. Isn't the fact that the SEC got
| wise to crypto scams and started enforcing them belatedly a
| _good_ thing? Better late than never, right?
|
| From your tone it seems to me like you think the injustice
| here is that Kin and TON should have been allowed on the
| gravy train too?
| josefx wrote:
| > that they managed to kill off Kik/Kin and Telegram TON
| before they launched
|
| Going by this[1] SEC complaint from 2019 Kik had already
| illegally sold $55 million worth of tokens to investors in
| 2017. I am not sure how you can look at these dates and get a
| "before" out of it, especially since it seems that some sort
| of launch did happen.
|
| [1] https://www.sec.gov/news/press-release/2019-87
| seibelj wrote:
| This article has nothing to do with crypto. HN never fails to
| bring up crypto whenever possible.
|
| Stock fraud? Wow should have done crypto. Guy got murdered? I
| wonder if the hitman was paid in crypto!
| anyfactor wrote:
| Seriously what happened to ICOs? Like even "Silicon Valley" the
| tv-show had an ICO arc. The _money gathering_ process for
| crypto ventures is now NFTs. Seriously, what is the current
| state ICOs? How are the ICO coins or importantly the ICO-backed
| ventures are doing?
| spamizbad wrote:
| Web3 is built on the blockchain; Web4 is built on the deli
| counter.
| mosdl wrote:
| proof of yummy
| jfghi wrote:
| Store of caloric value
| aaronbrethorst wrote:
| I know not with what weapons web3 will be fought, but web4
| will be fought with salami and hard cheeses.
| chiefalchemist wrote:
| Gives new meaning to the phrase, "That's a load of
| Bologna."
| stevenalowe wrote:
| Web3 may end up in the cell-block, in chains.
| [deleted]
| addcn wrote:
| Nice old fashioned securities fraud. Vintage. None of that SPAC
| **coin influencer discord garbage
| subroutine wrote:
| > Hometown International, took control of the outstanding
| shares of Hometown International and a separate shell company,
| E-Waste Corp., artificially inflated the price of both issuers'
| stock through manipulative trading, and used the entities to
| acquire privately-held companies in reverse mergers, with the
| intent to thereafter dump their shares at grossly inflated
| prices.
|
| This sounds kinda like a SPAC tbh.
| kgermino wrote:
| It (allegedly) basically was, except (oversimplifying) they
| skipped the whole "registering as a SPAC" part and pretended
| to be a functioning company that happened to merge with
| someone else.
| twawaaay wrote:
| This is baffling to me.
|
| Investors make their own valuations to figure if something is
| actually cheaper or more expensive than other people make it.
|
| It is literally the whole point of investing -- you are trying to
| figure out if what you are getting for your money is more
| valuable than the cash in hand.
| ceejayoz wrote:
| Sure, and we have a variety of rules to protect those investors
| from making decisions based on fraudulent data. That's a good
| thing.
| twawaaay wrote:
| There is two parts to this problem. Certain data needs to be
| made public and has to be truthful.
|
| On the other hand anybody should be able to make their own
| _opinion_ of what is the value of the company based on the
| data. Everybody who sells will want to increase the
| "official" valuation and everybody who buys will want to do
| as cheap as possible.
| mistrial9 wrote:
| dang - I tried four times at increasing intervals (up to 20
| minutes) to submit this same story (Bloomberg news) but was given
| a generic "posting too fast" .. ?
| dredmorbius wrote:
| Email HN's mods concerning site / account issues at
| hn@ycombinator.com
|
| <https://news.ycombinator.com/newsfaq.html>
| dredmorbius wrote:
| Also at the NYT:
| <https://www.nytimes.com/2022/09/27/business/100-million-doll...>
| (h/t mesofile).
|
| Matt Levine's brilliant _Bloomberg_ take is worth revisiting:
| Archive: <https://archive.ph/PL5lI> Discussed on HN at the time:
| <https://news.ycombinator.com/item?id=26867465>
| msbarnett wrote:
| Defector wrote a good story about trying to visit the deli last
| year https://defector.com/a-cnbc-reporter-ruined-my-lunch-
| plans-a...
|
| edit: Apparently I missed the follow-up, in which he did get to
| try the cheesesteak https://defector.com/despite-stellar-
| cheesesteaks-hometown-d...
| ralph84 wrote:
| Meh, the stock was traded over the counter. It's always been the
| Wild West for OTC stocks. They're OTC for a reason.
|
| More interesting is all of the Chinese scam stocks that managed
| to get NYSE or NASDAQ listed.
| mesofile wrote:
| Previous discussions:
|
| - _Single New Jersey deli boasts a $105M market cap, despite $14K
| in sales_ https://news.ycombinator.com/item?id=26836367
|
| - _Everyone Loves the $100M Deli_
| https://news.ycombinator.com/item?id=26867465
| dredmorbius wrote:
| The 2nd of those links is Matt Levine's truly delicious
| _Bloomberg_ story / column. Highly recommended, and I was
| going to link it myself.
|
| Paywall/Archive: <https://archive.ph/PL5lI>
|
| This also validates Levine's dictum: everything is securities
| fraud. <https://archive.ph/k36EO>
| ralmidani wrote:
| The title kinda sounds like the feds thought the deli was
| actually worth $100M and wanted the owners to file taxes
| accordingly.
| tpmx wrote:
| That's because this post is very obvious clickbait. Perhaps you
| could flag and/or downvote it.
| lotsofpulp wrote:
| There are no taxes owed by a company due to a company's shares
| being bought and sold.
| balderdash wrote:
| For those of you new to this:
|
| In the context of a securities transaction, a manipulative act is
| one that sends "a false pricing signal to the market" and
| therefore does not reflect the "natural interplay of supply and
| demand."[1] It is typically undertaken to create a false image
| that the security's value is based on supply and demand, and
| thereby induces unwitting investors to buy the security. Market
| manipulation is regulated under a number of statutes and rules.
| Most notably, Section 9(a)(2) of the Securities and Exchange Act
| (Exchange Act), titled "Manipulation of Security Prices,"
| prohibits transactions in certain securities that create "actual
| or apparent active trading in such security, or raising or
| depressing the price of such security, for the purpose of
| inducing the purchase or sale of such security by others." [2]
|
| https://www.arnoldporter.com/en/perspectives/publications/20...
| ncmncm wrote:
| Who was defrauded?
| dredmorbius wrote:
| From Matt Levine's 2019 column, investors, small or otherwise,
| who buy based on the fraudulent valuation:
|
| _The pastrami must be amazing. Small investors who get sucked
| into these situations are likely to be harmed eventually, yet
| the regulators - who are supposed to be protecting investors -
| appear to be neither present nor curious. From a traditional
| perspective, the market is fractured and possibly in the
| process of breaking completely._
|
| <https://archive.ph/PL5lI>
|
| Discussed at the time (h/t mesofile):
| <https://news.ycombinator.com/item?id=26867465>
| ncmncm wrote:
| Fraud requires deception. Again, who was deceived? Did any
| small investor lose a cent?
|
| I would rather see SEC do something about ICOs.
| djbebs wrote:
| That's a terrible argument, and could be used to justify
| charging every company.
| lokar wrote:
| They (allegedly) broke very clear regulations on trading
| securities. What's the problem?
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