Computer Parts Site Newegg Is Being Sued for Allegedly Engaging in Massive Fraud
A suit filed Friday in the US District Court in Los Angeles by four South Korean banks alleges "massive
The Industrial Bank of Korea, Keb Hana Bank, Nonghyup Bank, and Kookmin Bank-which are being represented by LA firm Gibson Dunn-are essentially following up on
a 2015 suit
which brought down the central figure of the alleged fraud:
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. From the lawsuit (emphasis ours):
Newegg issued fraudulent purchase orders for the purported purchase of home theater personal computers ("HTPCs") and other goods manufactured by Moneual. With regard to the HTPCs, 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.
Though his sentence was eventually reduced to 15 years, Park Hong-seok was convicted in the "classic Ponzi scheme" that ruined his company. The current suit demands monetary damages from Newegg and ASI to be determined at a jury trial.
We have reached out to both Newegg and ASI for comment and will update if we hear back.
[ LA Times ]