Monday, October 23rd 2017
Newegg Sued for Alleged Involvement in Ponzi Scheme Through Fake Orders
Newegg (owned by Beijing-based Hangzhou Liaison Interactive Information Technology) has been sued by a conglomerate of South Korean banks. The plaintiffs claim that the Southern California computer parts retailer has aided, abetted, and profited from enabling a Ponzi Scheme to take place with its products orders. The lawsuit, filed in U.S. District Court in Los Angeles, alleges that Newegg and ASI Corp., a South Korean computer wholesaler, made fraudulent orders from Korean hardware manufacturer Moneual, whose chief executive, Hong-seok Park, was sentenced in 2015 to 23 years in prison for financial fraud, and additionally subject to fines and forfeitures.
Newegg and ASI took part on the whole scheme by creating non-existent, exaggerated-pricing (sometimes 300x higher than market value) orders for Moneual products, thus allowing it to gain a higher valuation from investors. By inflating sales figures, the suit alleges that Moneual was able to receive hundreds of millions of dollars from South Korean banks. As a reward, Newegg and ASI received kickbacks from Moneual.
All in all, it's suspected that Moneual managed to get their hands on around $3 billion in loans from ten major Korean banks through this scheme. The complaint said "No such business would have bought the products at such an inflated price, unless it intended to create the illusion of extensive, profitable, high-value commerce between it and its supplier for the purpose of defrauding lenders into supporting the transactions."
The four banks are demanding a jury trial and monetary damages. They say that $230 million is still owed from the faulty loans that Moneual obtained.
Sources:
LA Times, Digital Trends
Newegg and ASI took part on the whole scheme by creating non-existent, exaggerated-pricing (sometimes 300x higher than market value) orders for Moneual products, thus allowing it to gain a higher valuation from investors. By inflating sales figures, the suit alleges that Moneual was able to receive hundreds of millions of dollars from South Korean banks. As a reward, Newegg and ASI received kickbacks from Moneual.
The four banks are demanding a jury trial and monetary damages. They say that $230 million is still owed from the faulty loans that Moneual obtained.
36 Comments on Newegg Sued for Alleged Involvement in Ponzi Scheme Through Fake Orders
As far as Newegg goes, that's a lot of high priced merchandise to justify that type of money (just an observation- I'm not suggesting they did anything wrong).
newegg has been doing devious things for years.
My own personal example: If you view products a few times the price jumps up.
About $200 US more than it sold for new back in the day when these were mainstream and of the current gen used.
I also like (NOT) the funny names some of these side vendors have, this one almost mocking the shopper viewing it with others on the sidebar being even higher.
I also highly suspect after the Chinese company had bought them out the egg is now become a way to move faked brandname Chinese-made products too and probrably through one of these hole in the wall vendors. Began seeing these odd vendors not long after these deals/loans happened timewise according to the info about what happened.
Though they do have a mail address and a 1-800 number for assistance.
A lot of sites also do the dynamic pricing where they adjust automatically on demand/views. So the incognito mode is a good tip.
As for Newegg, I've bought from them for over 10 years and never had any trouble. They've always been very good with RMAs too. Their only catch are the rebates where it's a 50/50 bet at best sometimes whether you get it even with everything filled out perfectly. But the rebates are handled by a third-party. So it's tough to put on Newegg, but I'm sure they know that the rebates are gamed a bit. They do this with "free after rebate" anti-virus software a lot where it looks good, except gl on the rebate and many of those av software packages use an annual subscription model where they auto charge you full renewal price after 1 year if you don't remember to cancel.
Despite of some bad experiences you might have, I have been actually pretty lucky with Newegg so far.
Here I got from them my Threadripper within days of release, where other stores had it back-ordered and priced ridiculously, let alone it is one of the only stores having a full selection of G.Skill RAM and Lian-Li chassis......
Also, all my returns so far were well handled, and even for products which are replacement-only, at worst I got full store credit refund and no requests had been declined.
For this issue, if it is for real, I can only say they were foolish to exchange that much money for all the troubles.
In spite of this I've never had a problem (Yet) with the egg, even though I've had to do a return twice in the past.
Things were resolved quickly and to my satisfaction, however do note these returns/RMA's were all done before the supposed incident the lawsuit is about meaning before the Chinese buyout was done.
I can't say what it would be like now, only what it was like before so.... Caveat Emptor.
If you have a problem but remain silent then expect these problems to continue unchecked, this way if it starts up and a trend/pattern is noticed then we'll know and you gotta start comparing notes somewhere for this to happen. I did see elsewhere a customer did report buying some earbuds from one of these side vendors and they turned out to be fakes of the real brandname.
He did report it BUT they are still listed as a vendor there. www.overclock.net/t/1640512/la-times-korean-banks-sue-newegg-alleging-ponzi-scheme/30#post_26407998
I know you'll have stuff like this coming out of the woodwork but it's still not a bad idea to keep one eye open at least, esp when you know as fact some shady stuff involving them in some way has happened.