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[LA Times] Korean banks sue Newegg, alleging 'Ponzi scheme'

7K views 91 replies 49 participants last post by  James296 
#1 ·
Quote:


Four South Korean banks filed a lawsuit against Newegg, Inc. on Friday alleging that the City of Industry company, which operates the computer parts and accessories retailer Newegg.com, conspired with a South Korean hardware manufacturer to defraud the banks of hundreds of millions of dollars.

The lawsuit, filed in U.S. District Court in Los Angeles, alleges that Newegg, along with computer wholesaler ASI Corp., made fraudulent orders for home-theater personal computers from Moneual, a Korean hardware manufacturer. Moneual, accused of masterminding the scheme, used these phony orders to secure financing from banks.

"Moneual then engaged in a classic Ponzi scheme," said the complaint, which was filed by U.S. law firm Gibson Dunn on behalf of the Industrial Bank of Korea, Nonghyup Bank, Keb Hana Bank and Kookmin Bank.

Moneual, according to the lawsuit, obtained additional financing from the banks backed by more fraudulent purchase orders from Newegg and ASI. The lawsuit alleges that Newegg and ASI received kickbacks for their participation.

In the end, Moneual secured more than $3 billion in loans from 10 major Korean banks through the intricate scheme of circular transactions. It defaulted on many of the loans and eventually owed around half a billion dollars. Moneual's chief executive, Hong-seok Park, was sentenced in 2015 to 23 years in prison for financial fraud (a high court later reduced his sentence to 15 years), and was subject to fines and forfeitures.

Two years on, the banks are now going after Newegg and ASI.

Newegg did not immediately respond to a request for comment.

The plaintiffs demand a jury trial and monetary damages. The lawsuit alleges that, of the orders Newegg and ASI made to Monseual that were financed by the banks, more than $230 million is still owed.
Source: http://www.latimes.com/business/technology/la-fi-tn-newegg-lawsuit-20171020-story.html
 
#2 ·
I have heard sketchy things about Newegg before but this, if true, takes the cake.

EDIT: To be honest this looks more like fraud on the part of a few employees of Moneual and maybe a few bad eggs at ASI and Newegg than a corporate driven ponzi scheme. It would be very difficult to prove that this wasn't the work of some rogue purchasing agents at either company or even fabricated entirely by employees at Moneual.
 
#5 ·
Quote:
Originally Posted by RikkAndrsn View Post

I have heard sketchy things about Newegg before but this, if true, takes the cake.

EDIT: To be honest this looks more like fraud on the part of a few employees of Moneual and maybe a few bad eggs at ASI and Newegg than a corporate driven ponzi scheme. It would be very difficult to prove that this wasn't the work of some rogue purchasing agents at either company or even fabricated entirely by employees at Moneual.
Even if the issue is with just a few employees in the middle of the food chain and not at the top, the companies are still responsible for what they did, as it seems they benefited from this anyway, as according to the article, both companies got something out of putting those orders (the kickback claim). So in the eyes of the law, if it is true, they benefit and participated in an illegal.
 
#7 ·
Quote:
Originally Posted by SpankyMcFlych View Post

I'll be honest, kinda hard to feel any sympathy for the banks. Maby the korean banks are different but the banking system in the west is just a bunch of parasites preying on the citizens at large. Anyone able to put one over on the banks is doing good work imho.
You should always have some sympathy. Even if it is a pure evil bank there are innocent people who work there that can lose their jobs. I get where your coming from although I don't agree. Banks overall do much more good than bad.
 
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#8 ·
IF Newegg done so, maybe it was to acquire a fleet of drones so they can drop all those defective Korean products back on their country.

biggrin.gif
 
#9 ·
You know, sometime ago Newegg began having listings for stuff from other vendors on their site and nearly all of their prices are either higher than the egg's or just simply outrageous period.
Some of the listings have prices selling older pieces for more than double it would have cost back in the day new, this example has close to a 100% markup from it's peak price when it was the latest tech.... Which it's clearly not now.
https://www.newegg.com/Product/Product.aspx?Item=9SIA6ZP5X42712
And look at some of the names of these vendors too.... I'd be craving savings too (And that's an actual name for one of these side vendors) IF I were stupid enough to buy one from these crack-in-the-wall vendors.

I just wonder if this isn't a part of it somehow, the timing of when these alternate listings began to appear is around the time when Moneual did the deed and Hong-seok Park got busted and convicted.
 
#10 ·
Quote:
Originally Posted by Kryton View Post

You know, sometime ago Newegg began having listings for stuff from other vendors on their site and nearly all of their prices are either higher than the egg's or just simply outrageous period.
Some of the listings have prices selling older pieces for more than double it would have cost back in the day new, this example has close to a 100% markup from it's peak price when it was the latest tech.... Which it's clearly not now.
https://www.newegg.com/Product/Product.aspx?Item=9SIA6ZP5X42712
And look at some of the names of these vendors too.... I'd be craving savings too (And that's an actual name for one of these side vendors) IF I were stupid enough to buy one from these crack-in-the-wall vendors.

I just wonder if this isn't a part of it somehow, the timing of when these alternate listings began to appear is around the time when Moneual did the deed and Hong-seok Park got busted and convicted.
I was thinking the EXACT same thing, I honestly haven't bought anything from newegg in years. When they started not being the best deal around and then they started spamming my email (after I checked to not be emailed) with deals from other vendors I knew something was up.
 
#12 ·
They were the place to build your own PC for a good 10 years (2004-2014) if you wanted to save a ton over retail but they pretty much are not even as good as Amazon now..

Over the years their model didn't really develop and their deals were basically just 20 dollars off something via rebates that took 6 months to get. I think I have gotten maybe 2 deals in a 10 year period that I felt were really true deals. People use to fawn over this site but I found it was severely lacking even on holidays like Black Friday...

I have found with places like Microcenter giving discounts on combos that Newegg should have done for years and they are an actual retail store. Newegg seems stingy lol

Newegg was a pioneer online retailer but they have been stagnant on an outdated model of rebates and weird shipping prices that have turned many off over the years along with nickle and diming its loyal customers with no real reward system.
 
#13 ·
Newegg is still my go-to source for electronics but they have gone downhill considerable the last couple of years. anymore now, it seems their own inventory has been drying up and a higher percentage of their listings have been for their Marketplace vendors, which I prefer to avoid since so many appear to be dodgy.
 
#14 ·
Quote:
Originally Posted by dlee7283 View Post

They were the place to build your own PC for a good 10 years (2004-2014) if you wanted to save a ton over retail but they pretty much are not even as good as Amazon now..

Over the years their model didn't really develop and their deals were basically just 20 dollars off something via rebates that took 6 months to get. I think I have gotten maybe 2 deals in a 10 year period that I felt were really true deals. People use to fawn over this site but I found it was severely lacking even on holidays like Black Friday...

I have found with places like Microcenter giving discounts on combos that Newegg should have done for years and they are an actual retail store. Newegg seems stingy lol

Newegg was a pioneer online retailer but they have been stagnant on an outdated model of rebates and weird shipping prices that have turned many off over the years along with nickle and diming its loyal customers with no real reward system.
I sadly agree. I still often buy graphics cards from them as they typically have a superior stock and selection to Amazon, with competitive pricing, but they don't often match Amazon for other components very well, and their shipping is too expensive for me.
 
#16 ·
Quote:
Originally Posted by JackCY View Post

Hard to say which I dislike more, banks or newegg.
That's an easy choice for me. Banks are far worse. I haven't used one in decades (I use a credit union instead). Newegg didn't help cause the crash of '08; banks did.
 
#17 ·
call me crazy, but what do you guys have against banks? I'm literally not paying a dime for their services and they're keeping my holdings liquid.

not surprised Newegg pulls off shady things...glad someone called them out on their BS.
 
#20 ·
Quote:
Originally Posted by twitchyzero View Post

call me crazy, but what do you guys have against banks? I'm literally not paying a dime for their services and they're keeping my holdings liquid.

not surprised Newegg pulls off shady things...glad someone called them out on their BS.
Maybe banks in Canada don't do it but the ones here in the SSA (Squabbling States of America) will nickel and dime you to death. They have fees for pretty much everything up to scratching your backside. Banks played a major role in the crash of 2008. I don't pay any fees with my Credit Union. All I have to do is maintain a $25 balance in each of my major accounts (each account has several sub accounts).
 
#21 ·
I've been done with Newegg for 4 some years now. Trying to return DOA items is an absolute nightmare for large orders. Amazon and B&H have always had my back. The only thing I use Newegg is their component search and filtering as they seem to catalog parts better than other sites. But when it comes to buying, it's always elsewhere for me.
 
#22 ·
I have no pity for banks when they get ripped off.
 
#23 ·
Here is some news from October of last year which may be relevant for context:

http://www.pcgamer.com/newegg-discusses-implications-of-pending-chinese-investment-deal/
Quote:
Heading into this past weekend we said we were still gathering information on a report that Newegg was in the process of being owned by a Chinese technology company. As the story went, Hangzhao Liaison Interactive Information Technology Co., Ltd. (Liason Interactive for short) was making a sizable investment that would give it a majority stake in the California company. Since then, a Newegg official has confirmed with us that there's a pending deal. He also offered up some clarification on the details and insight into what to expect.

First of all, the deal is for $263 million, not $2.63 billion, according to Merle McIntosh, SVP of Sales and Marketing at Newegg. That's seems surprisingly low to us considering its last reported revenue was $2.7 billion in 2013. Regardless, it's enough to make Liason Interactive the majority owner, if in fact the deal closes. McIntosh also reiterated that nothing is yet finalized, saying the deal is still in progress as it awaits regulatory approval.
 
#24 ·
Sad how far Newegg has fallen, they used to be the best place for computer parts by far. Then they started branching out of California, trying to be like Amazon and sell normal items, grab in a ton of Asian vendors to use the site like Alibaba. Things went downhill real fast. Doesnt surprise me they would be involved in some sort of fraud, but I also have to wonder how these banks could possibly loan out 3 BILLION Dollars? Seems weird that they wouldnt understand even the most basic fundamentals.
 
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