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Source: http://www.latimes.com/business/technology/la-fi-tn-newegg-lawsuit-20171020-story.html
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.