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posted by martyb on Monday October 23 2017, @11:43PM   Printer-friendly
from the pay-no-attention-to-the-companies-behind-the-curtain dept.

Gizmodo and Digitaltrends are among those reporting that electronics retail website Newegg has been sued by South Korean Banks, who say that Newegg and the South Korean Hardware company Moneual conspired to defraud the banks of "hundreds of millions of dollars."

The lawsuit, which was filed in U.S. District Court in Los Angeles, claims that Newegg and computer wholesaler ASI Corp. made false orders for home-theater computers from Moneual. The banks claim that Moneual organized the scheme and used the fake orders to obtain funds from the four banks. Newegg and ASI allegedly received a cut of the money in exchange for their cooperation.

[...] The computers that Moneual ordered were allegedly priced at 300 times their actual retail value, which is why the banks believe Newegg and ASI were part of the scam.

"No such business would have [paid] such an inflated price, unless it intended to create the illusion of extensive, profitable, high-value commerce... for the purpose of defrauding lenders into supporting the transactions," the lawsuit alleges.

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.


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  • (Score: 5, Interesting) by khallow on Tuesday October 24 2017, @01:08AM (8 children)

    by khallow (3766) Subscriber Badge on Tuesday October 24 2017, @01:08AM (#586673) Journal
    Apparently, ten banks got suckered into this. The paragraph before the "[...]" in the quote of the story:

    Moneual pulled in more than $3 billion from the from [sic] 10 South Korean banks. The company defaulted on many of those loans and ended up owing the banks about half a billion dollars. In 2013, Hong-seok Park, the company’s CEO, was sentenced to 25 years in prison, in addition to hefty fines. A higher court later reduced his sentence to 15 years.

    That many banks indicates to me a failure mode of the entire banking sector in South Korea rather than negligence of particular banks.

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  • (Score: 3, Interesting) by DECbot on Tuesday October 24 2017, @03:01AM (5 children)

    by DECbot (832) on Tuesday October 24 2017, @03:01AM (#586700) Journal

    I wonder if this is in any way related to the new owners of Newegg, Hangzhao Liaison Interactive Information Technology Co., Ltd. [techpowerup.com]. It would not surprise me if a successful geek outlet is sold as a shell corporation to a foreign company in order to conduct massive fraud scams.

    --
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    • (Score: 0) by Anonymous Coward on Tuesday October 24 2017, @04:09AM (4 children)

      by Anonymous Coward on Tuesday October 24 2017, @04:09AM (#586712)

      So how is newegg since the takeover?

      • (Score: 3, Informative) by Anonymous Coward on Tuesday October 24 2017, @05:02AM (1 child)

        by Anonymous Coward on Tuesday October 24 2017, @05:02AM (#586724)

        Shitty. Half their items are now shady Chinese third-party sellers and the UI is set up to make it hard to tell whether you are buying from Newegg or the third party Chinese seller. I stopped using them all together years ago. They are garbage and I have always been able to find a lower price at another online retailer or eBay for every item they sell. This is even true of the their shell shocker and other deals.

      • (Score: 5, Interesting) by Joe Desertrat on Tuesday October 24 2017, @07:58AM (1 child)

        by Joe Desertrat (2454) on Tuesday October 24 2017, @07:58AM (#586763)

        Their website has become one of the worst script laden messes of any I've used. So much so my last experience with them was probably my very last. I'm not surprised to find out it is new owners responsible.

        • (Score: 2) by LoRdTAW on Tuesday October 24 2017, @12:26PM

          by LoRdTAW (3755) on Tuesday October 24 2017, @12:26PM (#586815) Journal

          Agreed. Since about 3 or so years ago their site has become close to unusable. There were points where I gave up looking because it was pulling in scripts from dozens of sites.

          My biggest gripe was their Amazon wanna be shift towards selling everything while letting in a deluge of 3rd party sellers. No newegg, I'm not buying a fucking blender or tires from you. Ever.

  • (Score: 4, Interesting) by khallow on Tuesday October 24 2017, @04:01AM (1 child)

    by khallow (3766) Subscriber Badge on Tuesday October 24 2017, @04:01AM (#586711) Journal
    There's some weird aspects to this case. I couldn't find a timeline of Moneual events, but here's a brief summary [koreaherald.com]:

    On paper, the company’s performance was more than impressive. Moneual, founded in 2004, joined the club of firms whose sales exceeded 1 trillion won last year, boasting 1.27 trillion won in sales and 110 billion won in operating profit.

    No wonder it was inducted into the ranks of the “Hidden Champions,” a group of promising small- and medium-sized enterprises named by the Export-Import Bank of Korea. No one questioned the value and potential of this marvelous tech firm which grew by an average of 50 percent each year.

    From this Tom's Hardware article [tomshardware.com], I place the exposing of the Moneual fraud and the subsequent bankruptcy around late 2014.

    So an obvious question here is why is it taking three years for these banks to sue Newegg? Surely, the fraudulent transactions in question were discovered earlier.

    Anyway, moving on, it's looking a lot like the banks got greedy and didn't look too hard at this business. That kind of sustained growth over a whole decade should have been a warning sign.

    • (Score: 4, Informative) by bradley13 on Tuesday October 24 2017, @01:04PM

      by bradley13 (3053) on Tuesday October 24 2017, @01:04PM (#586829) Homepage Journal

      Too lazy to look it up, but I recall reading somewhere that the transactions in question were forged. In which case, they likely never existed, or at least not in the form presented. However, the banks failed to recover all of their money, so they are now looking for other deep pockets to raid. After all, a bank can't admit that it gave stupid loans - it's got to be somebody else's fault.

      --
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