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Newegg accused of involvement in Ponzi scheme by South Korean banks

By Greg S ยท 14 replies
Oct 22, 2017
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  1. Tech retailer Newegg Inc. is facing legal action from four South Korean banks alleging that hardware manufacturer Moneual Inc. (parent company of Zalman) helped Newegg to defraud banks of their money.

    The suit accuses Newegg and ASI Corporation, an electronics wholesaler, of creating non-existent and exaggerated orders for Moneual to gain a higher valuation from investors. By inflating sales figures, the suit alleges that Moneual was able to receive hundreds of millions of dollars from South Korean banks that was not backed by any collateral, placing investors at great risk.

    In the complaint, Newegg and ASI allegedly received payments for participating in the scheme. Gibson Dunn law firm, representing Kookmin Bank, Keb Hana Bank, Nonghyup Bank and Industrial Bank of Korea, believes Moneual was able to obtain more than $3 billion in loans from 10 different Korean banks by falsifying purchase orders.

    Moneual has been under investigation for financial fraud for several years now. In 2015, former CEO Hong-seok Park was sentenced to 15 years in prison and hit with hefty fines. Now that Moneual has had difficulty repaying debts to banks, Newegg and ASI have come under fire for having close ties to the alleged fraud.

    Newegg and ASI both frequently placed orders with Moneual but the key fact that indicates their knowledge of the scheme is that certain products were allegedly bought for over 300 times their retail values. "No such business would have bought the products at such an inflated price, unless it intended to create the illusion of extensive, profitable, high-value commerce between it and its supplier for the purpose of defrauding lenders into supporting the transactions," states the legal filing.

    The plaintiffs are seeking monetary damages through a jury trial. Up to $230 million is still owed according to the South Korean banks.

    Permalink to story.

  2. cliffordcooley

    cliffordcooley TS Guardian Fighter Posts: 10,570   +4,411

    I'm going to laugh out loud and then move on.
  3. psycros

    psycros TS Evangelist Posts: 2,225   +1,799

    Yeah, no point in elaborating and getting called dirty names.
    cliffordcooley likes this.
  4. dms96960

    dms96960 TS Guru Posts: 311   +71

    I don't think Newegg is laughing out loud.
  5. cliffordcooley

    cliffordcooley TS Guardian Fighter Posts: 10,570   +4,411

    Probably not, but this is about the equivalent of "shooting the messenger".
  6. Steed

    Steed TS Booster Posts: 46   +27

    cliffordcooley likes this.
  7. Will86c

    Will86c TS Member

    Newegg has been going downhill ever since they got bought out.
    robb213 and Theinsanegamer like this.
  8. Seraphim401

    Seraphim401 TS Booster Posts: 72   +27

    I'm finding it hard to sympathise with banks.
  9. Skjorn

    Skjorn TS Maniac Posts: 290   +159

    I hope they get caught. I quit buying from Newegg after the take over. Everything I want I get at Microcenter or B&H or Amazon.
    madboyv1 likes this.
  10. Skidmarksdeluxe

    Skidmarksdeluxe TS Evangelist Posts: 8,647   +3,280

    "CEO Hong-seok Park was sentenced to 15 years in prison and hit with hefty fines"
    Now that's a decent sentence for the crime. I hope he "Parks" for at least 7 before being considered for parole.
    dms96960 likes this.
  11. Skidmarksdeluxe

    Skidmarksdeluxe TS Evangelist Posts: 8,647   +3,280

    How can such a well known, big e-tailer even consider participating in such a scam? If they are found guilty, throw the lot involved in the slammer for a long time and close down the business. It'll be tough for the innocent employees but they won't be the first, and certainly not the last to lose their jobs due to questionable management.
    dms96960 likes this.
  12. EClyde

    EClyde TS Evangelist Posts: 1,528   +544

    I Love Newegg and hope this goes nowhere
  13. wiyosaya

    wiyosaya TS Evangelist Posts: 2,923   +1,433

    IMO, Newegg has always been shady from asking you to pay an extra fee for quick processing that was equivalent to their standard shipping to charging restocking fees. My experience with them has, in general, been good. But, if I can, I will go elsewhere.

    IMO, B&H offers the absolute best service, however, their selection is not as good as Newegg.

    I avoid Amazon where ever possible. Maybe I'll return to other old shops like Buy.com to name one.
  14. Cycloid Torus

    Cycloid Torus Stone age computing. Posts: 3,565   +950

    So someone added zeroes to some invoices. The banks are looking for some deep pockets to make up losses and "alleged" is not proven. While it is possible that some mid-level flunky at NewEgg or ASI participated, I find it hard to believe that it was an immensely STUPID corporate decision on a par with Miniscribe shipping bricks.
  15. toooooot

    toooooot TS Maniac Posts: 238   +104

    I agree with some of the comments. newegg is going downhill. I dont find any great deals after they got bought. It is either amazon or b&H. I mean I bought a motherboard on B&H. This should tell newegg something. Lately, all I get is the $25 offer if I spend 500 on newegg. It aint happening. I ll spend those 500 elsewhere.

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