Newegg hit by Ponzi scheme lawsuit

October 23, 2017 // 12:15 p.m.

Tags: #banking #fraud #lawsuit #moneual #newegg #ponzi-scheme #south-korea

Computer hardware etail giant Newegg has been hit with a lawsuit from four South Korean banks alleging that the company knowingly participated in a scheme to defraud billions of dollars in loans given to Korean hardware manufacturer Moneual.

Following an investigation into the operation of Moneual, an investigation which has since seen the company's chief executive Hong-seok Park jailed for 23 years - reduced to 15 on appeal - for his part in the scheme, evidence of a $3 billion (around £2.28 billion) fraudulent loan application scam came to light. In the scheme, investigators claim, Moneual received hardware orders from Newegg and wholesaler ASI Corporation for home theatre equipment at hundreds of times their market value then used these fraudulent orders to apply for loans from ten banks. Unsurprisingly, the company then defaulted on several of these loans before eventually running up a half-billion dollar tab to the banks.

The LA Times now reports that four of the banks, the Industrial Bank of Korea, Nonghyup Bank, Keb Hana Bank, and Kookmin Bank, have filed suit against Newegg and ASI for their alleged participation in the scheme. According to the filing, both companies had to have known of the fraud as '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.'

Neither company has issued a public statement on the filing, which seeks a jury trial and monetary damages.


UPDATE 20171024:

Newegg legal counsel Matt Strathman has issued the following statement on the company's behalf: 'Newegg prides itself on conducting business fairly, ethically and honestly.  The company vehemently denies the allegations in the complaint filed last week, and Newegg intends to vigorously defend itself against those unfounded charges.'


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