Newegg Slapped With Lawsuit For Allegedly Conspiring In Massive Ponzi Scheme Fraud

Most computer enthusiasts are at least familiar with the name Newegg as one of the places to go for all the computer hardware you might need when building up a new PC. Newegg Inc., the parent company operating Newegg.com, has been hit with a lawsuit that alleges the company was involved in a Ponzi scheme that defrauded South Korean banks out of hundreds of millions of dollars.

newegg

According to the suit, Newegg consipred with a South Korean hardware manufacturer called Moneual in the Ponzi scheme. Moneual is the alleged mastermind of the entire scheme that ultimately aimed to allow it to use phony orders placed via Newegg and another computer wholesaler, ASI Corp., to gain new financing from banks.

The banks involved in the suit include Industrial Bank of Korea, Nonghyup Bank, Keb Hana Bank and Kookmin Bank. The banks are all represented by U.S. based legal firm Gibson Dunn. The suit claims that both Newegg and ASI received kickbacks for their participation in the scheme.

The false transactions was leveraged by Moneual to secure $3 billion in loans from ten major South Korean banks. It eventually went default on many of the loans, owing in the area of half a billion dollars. Hong-seok Park, the CEO of Moneual, was sentenced in 2015 to 23 years in prison for financial fraud; that sentence was later reduced to 15 years by a high court. The executive was also hit with fines and forfeitures.

The banks are now going after Newegg and ASI for their participation in the scheme. According to the banks the hundreds of millions of dollars lent to Moneual was because Newegg and ASI showed they made sizable orders from Moneual for computers ordered at 300 times market value.

“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,” the complaint said.

The plaintiffs in the case want a jury trial and are seeking monetary damages. 


Via:  LA Times
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