Computer Parts Site Newegg Is Being Sued For Allegedly Engaging In Massive Fraud (gizmodo.com)

schwit1 shares a report from Gizmodo: A suit filed Friday in the U.S. District Court in Los Angeles by four South Korean banks alleges "massive fraud" with an outstanding debt of at least $230 million, and California-based electronic parts seller Newegg has been named as a defendant, along with wholesaler ASI Corporation and its officers. These new documents allege that Moneual, Newegg, and ASI were engaging in "an intricate scheme of circular transactions." The banks submitted a list of over 70 pages of supposedly fraudulent orders as evidence that Newegg and ASI created the paperwork that Moneual used to secure loans. The suit further claims that Newegg and ASI "received kickbacks from Moneual in varying amounts in exchange for agreeing to collude with Moneual to defraud the Banks." One method of inflating purchase orders for Moneual -- a brand barely remembered in North America as a a low-tier entrant into the robotic vacuums market -- allegedly involved creating paperwork that showed components being sold for over 370 times their value.

Comments

The 2015 lawsuit alleged forgery

[naughtynaughty]

"The Seoul Central District Court convicted Park Hong-seok, head of Moneual Inc., a manufacturer of computers and small home appliances, of getting a total of 3.4 trillion won (US$3 billion) from 10 local banks between October 2007 and September 2014 based on forged documents that falsely showed the company's computer export contracts."

Were they forged, as alleged back in 2015, or were they real and NewEgg was part of the scheme? What was in it for NewEgg? It isn't like they did a lot of business selling Moneual's products.

Seems like the lawyers are looking for deep pockets.

Re:The 2015 lawsuit alleged forgery

[jonsmirl]

This does not make sense: "Moneual purported to charge ASI and Newegg between $2,530 and $2,980 per HTPC unit, and those amounts were stated on the invoices and purchase orders from ASI and Newegg upon which the Banks advanced funds to Moneual. However, the Banks later learned that in reality, the HTPCs were only worth $8 per unit."

How can an HTPC be worth $8? Newegg still has empty Moneual cases listed for $70. Depending on what it was filled with in 2012 $2,530 is not an impossible price. $8 seems close to the shipping cost, not the product cost.

Re:The 2015 lawsuit alleged forgery

[SeattleLawGuy]

Seems like the lawyers are looking for deep pockets.

Of course the lawyers are looking for deep pockets. Their clients are out hundreds of millions of dollars. The question is the extent to which NewEgg was responsible for that. If they weren't responsible or if they were, the case should settle quickly. Hopefully it's pretty clear.

We don't know if they were responsible because all we have now is a Slashdot summary of an article describing a complaint that accuses NewEgg of something and our own personal experiences with NewEgg. (Which are generally positive.) Drawing conclusions from it would be like making decisions based on Betazoid intuition.

Re:The 2015 lawsuit alleged forgery

[Swave An deBwoner]

When questioned about this, the NewEgg sales team admitted that "we lose a little money on each one we sell, but we make it up in volume".

Re:The 2015 lawsuit alleged forgery

[UnknowingFool]

There may be another explanation in that Newegg sometimes acts as the middleman. You see this in the product details when it is listed as "Sold and Shipped by XXXX" instead of Newegg. So Monueal or their agents could fake "selling" many HTPCs when for a small service fee that Newegg that would collect as the middleman.

Re:The 2015 lawsuit alleged forgery

[Anonymous Coward]

"Madman" Muntz, a 1950s automobile and TV dealer. His TVs were reported designed by having his engineers start with competitor's models and see how many components they could remove or replace with cheaper versions.

Re:The 2015 lawsuit alleged forgery

[Swave An deBwoner]

Wow, what an interesting story: https://en.wikipedia.org/wiki/Madman_Muntz.

Thanks!

Re:The 2015 lawsuit alleged forgery

[grep -v '.*' *]

Drawing conclusions from it would be like making decisions based on Betazoid intuition

I thought for trials by jury, THAT's what the defense lawyers looked for in a jurist. If they had a college degree or knew Schrodinger had a cat, they were OUT. If they knew what channels and when Jerry Springer was on, they were the next in line.

Anything, just as long as they could be convinced by feelings and not look at those annoying pesky facts.

Re:The 2015 lawsuit alleged forgery

[JoelKatz]

I suspect that they added NewEgg to the suit because they figured that Moneual would point the finger at NewEgg if they just sued Moneual. The best way to ensure that NewEgg shows up in the courtroom to solidly place the blame on Moneual is to sue NewEgg too.

But I like NewEgg

[jwhyche]

Bummer. I actually liked NewEgg.

Re:But I like NewEgg

[DogDude]

It's even easier to research on Newegg and then buy on Newegg.

Re:But I like NewEgg

[93 Escort Wagon]

Bummer. I actually liked NewEgg.

So... guilty until proven innocent?

Re:But I like NewEgg

[jwhyche]

Never saw that problem. I always would do a price comparison between newegg and amazon for price. But speaking algorithms I did love some of the suggestions that newegg would come up with.

"We see you just bought 4 hard drives, would you like this chansaw to go with them?"

Re:But I like NewEgg

[jwhyche]

No. It is just things like this tend to spiral out of control and usually sink companies like newegg. As for me I plan to continue using newegg till they shut the lights off if their price are lowest.

Re:But I like NewEgg

[DogDude]

When price is all that matters, you'll get raped by that one company you love so much, sooner rather than later.

We spent seven figures with newegg in 2002...

[Anonymous Coward]

so we were for a long time one of their largest customers. They used to be great. Then they, like amazon.com did when they abandoned books and became stupid, decided they wanted to become a platform to support third-party frauds that weren't them. When newegg only sold computer parts, they were the best in the business. Now, they're just like any other site that allows fraudulent third-parties to sell via their platform. I don't want to see ads for, for example, air conditioners and bidet toilet seats.

Re:We spent seven figures with newegg in 2002...

[MBGMorden]

I have to agree with this - and I don't know why companies keep doing this. When I want to shop at a flea market I got to eBay or Aliexpress. That's their ENTIRE BUSINESS MODEL.

When I go to Amazon, Walmart, or Newegg, the first thing I do is to scroll to the side and filter out 3rd party vendors.

But at least it was new ...

[140Mandak262Jamuna]

The banks ended up egg in their faces, but small consolation, it was at least Newegg...

(Ducks and runs away, dodging more eggs)

Re:Is There A Point to Newegg Premier Anymore?

[MBGMorden]

Newegg's interface is still a lot better for actually finding computer parts. All of their filters are much more targeted.

That said - I'll admit that due to Prime I often go to Newegg.com, create a shopping list of what I want . . . then go over to Amazon and search the specific product names to duplicate the cart and buy from there instead.

Patent Trolls

[Gim Tom]

Although it might be unrelated, I can't help but wonder if some patent troll is behind this. Newegg has been giving them a hard time and I wouldn't put some form of obscure payback past them.

Re:Is There A Point to Newegg Premier Anymore?

[The Raven]

PC Part Picker... and you can tell it to check Amazon and NewEgg outomatically and pick whichever gives you the best price, taking Prime and Tax into account. Even with Prime, I actually find NewEgg to usually be cheaper for high value PC guts. For fiddly bits like cables and fans Amazon usually wins.

Looks like a circle fraud

[Anonymous Coward]

Moneual sells lots of these home entertainment (Vista PCs in hifi boxes with speakers etc) to New Egg at $2500+, then buys a lot of them back from NewEgg. Leaving only a net sale per unit of $8, since a lot of the buys cancels out a lot of the sale value.

Moneual shows only export invoices to banks to secure funding, does not show the purchase side which is hidden in other companies are via other channels.

I doubt Newegg did anything wrong or illegal here, it's just that Moneual have no money, so they've been added to the lawsuit to try to generate some cash to make the lawsuit worthwhile.

Happening at Amazon, too

[SethJohnson]

The circle fraud you describe is absolutely happening over at Amazon. I had thought it was only to farm positive reviews and get products boosted to #1 seller status in a category, but now I suspect the manufacturers may be benefitting in other ways. As an example, do a search on Amazon for "pico projector"-- you'll find a bunch of cheapie ~$100 video projectors with hundreds if not thousands of 4 and 5 star ratings. This item is the "best seller" in the category. Check the reviews. There are two thousand reviews written by 'verified purchasers' who simply relate a few of the product features likely printed on the box and offer no comparison with competing products nor mention any possible drawbacks (like that these projectors don't display true HD resolution), and English does not seem to be the authors' native language.

i like this mini projector very much! it has really good quality and works really well~ it shows very clear and also with sounds by itself. This projector is very good, It's worth to get this!

I love this projector. when it will be in 20 ft or 10 ft image is clear that when it is in 4 to 5 ft otherwise it is really good quality in dark.

Projector is good value for money. Small, lightweight and does the job effectively. The cables and remote control are added plus. And the USB interface is really cool. You don't even need to connect is to a computer. Just plug in the USB and enjoy.

If you click through on any of these profile names, you'll see hundreds of reviews written on cheap, Asian-sourced gadgets. Never any expensive, name-brand products. And the reviewers are so prolific, they write the reviews almost every day and usually upwards of five reviews per day. It's common to see one of these fake reviewers purchase two or three knock-off fitness trackers over the course of two months, yet none of their reviews compare the multiple trackers they seemingly have recently purchased.

I can imagine that when they boost a product up to "#1 seller" status, they can get loans against projected sales volume just like these scammers did via their Newegg fraud.

Re:Happening at Amazon, too

[Shadow of Eternity]

Amazon and Newegg both went to shit when they opened themselves up to being filled with chinese knockoffs in the "marketplace". It basically turned them into a more expensive ebay where you need to try and hunt for the one legitimate seller page and thenhope Amazon's mixed inventory doesn't send you the knockoff anyway (like happened with the eclipse glasses).

Hell even on Ebay you used to at least be able to just block any listing not in North America, although now even that doesn't work.

Re:Is There A Point to Newegg Premier Anymore?

[Rockoon]

His point is that that DOA video card was probably already returned DOA by someone else. NewEgg uses customers to "confirm" that products are defective.