South Korean Banks Accuse Newegg, ASI Of Ponzi Scheme (Updated)

Update, 10/24/17, 6:05am PT: After this story's publication, we received the following statement from Matt Strathman, Newegg Legal Counsel, North America:

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.
Original article: 10/23/17, 11:00am PT:

Every system builder knows Newegg. The retailer is a popular source of components, peripherals, and other technological goodies. Soon it might be famous for another reason—allegedly helping Moneual fraudulently raise $3 billion in financial backing off the back of "massive" HTPC sales. The Los Angeles Times reported that four South Korean banks have filed a lawsuit against Newegg and ASI claiming they both helped Moneual.

Moneual should be a familiar name to longtime Tom's Hardware readers. We covered the initial claims of fraud against the company in 2014, and we also covered the impact the investigation had on one of its subsidiaries, Zalman. The question with this new lawsuit isn't whether or not Moneual committed fraud; it's whether or not Newegg and ASI knowingly helped the company do so in exchange for a slice of the Ponzi-flavored pie.

According to the Los Angeles Times, the banks alleged in their lawsuit that both Newegg and ASI submitted fraudulent purchase orders for large numbers of HTPCs and that "Moneual priced the computers that were supposedly ordered at 300 times their actual market value." Moneual then used those orders to convince the banks to invest more money. One thing led to another, and then eventually $3 billion in fraud was perpetrated.

The Los Angeles Times excerpted the complaint:

“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.

We reached out to Newegg and ASI for comment; neither responded to our requests. We'll update this story if either (or both) gets in touch. If not, well, we expect to learn more about their involvement, or lack thereof, if the case heads to court.

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  • JamesSneed
    The old Newegg I would say no way I don't believe it. The Chinese owned Newegg (for about 1 year now) I just wont be giving them the shadow of the doubt like I would have. I have seen there service start to lack since the buyout and all things being equal I will buy from Amazon now.
  • cia1413
    How is this a ponzi-scheme? Are they saying that they paid bank loans with borrowed money from other banks?
  • JamesSneed
    Anonymous said:
    How is this a ponzi-scheme? Are they saying that they paid bank loans with borrowed money from other banks?

    They are saying they had xxx income from the hugely overpriced/over inflated sales and got xxx money from the bank because of how well they were doing. Where it falls apart and makes it a ponzi scheme is if the vendors didn't actually pay that which it sounds like they did not. It's more down to who doctored the purchase orders from Newegg and ASI.

    My vote of who had the most to gain and using occam's razor as guidance is that the purchase orders were doctored by Moneual especially seeing two different companies with "fake" orders.