LA Times reports
that four South Korean banks have filed lawsuits against
NewEgg, alleging the company engaged in a Ponzi scheme intended to defraud the
banks out of millions of dollars (thanks
). The suit was filed in U.S. District Court in Los Angeles,
accusing Newegg and computer wholesaler ASI Corp. of making fraudulent orders
for home-theater personal computers from Korean hardware manufacturer Moneual.
Moneual is said to be the architects of the scheme, and they are using these
phony orders to secure bank financing. Here's word:
The banks allege that
they lent Moneual hundreds of millions of dollars because the manufacturer had
shown that Newegg and ASI had made sizable orders. Both Newegg and ASI were in
on the scheme, the banks say, because Moneual priced the computers that were
supposedly ordered at 300 times their actual 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.
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.