Newegg.com Allegedly Involved in Ponzi Scheme, Suit Pending

A quartet of South Korean banks has filed a suit against Newegg, Inc., the company that operates popular computer parts eTailer Newegg.com reports the LA Times. The suit alleges that Newegg conspired with a South Korean hardware manufacturer to defraud the banks involved in the suit of hundreds of millions of dollars. The suit was filed in the US District Court in LA.

The suit alleges that Newegg and ASI Corp. made fraudulent orders of a large number of home-theater personal computers form Moneual, a Korean maker of computer hardware. Moneual is said to be the mastermind behind the scheme that saw the fraudulent orders used to secure financing from banks.

Moneual then engaged in a classic Ponzi scheme, said the complaint, which was filed by U.S. law firm Gibson Dunn on behalf of the Industrial Bank of Korea, Nonghyup Bank, Keb Hana Bank and Kookmin Bank.

The suit alleges that Moneual used the fraudulent orders from Newegg and ASI to seek and obtain more financing from the South Korean banks. According to the suit, both Newegg and ASI were given kickbacks for their participation in the scheme. The plaintiffs are demanding a jury trial and monetary damages in the suit. Moneual was the parent company of Zalman Tech Co. Ltd., which stopped trading stock in 2014 on allegations of fraud.