Four major banks from South Korea have filed a lawsuit against Newegg, a US-based computer parts retailer, alleging the company has participated in a massive financial scheme that has defrauded the banks with hundreds of millions of dollars.
The four banks — Industrial Bank of Korea, Nonghyup Bank, Keb Hana Bank, and Kookmin Bank — also named fellow US computer wholesaler ASI Corporation in the lawsuit.
According to documents filed last Wednesday in a federal court in Los Angeles, Newegg and ASI Corp engaged in a Ponzi-like scheme with Moneual, a South Korean electronics firm.
The banks claim that Newegg and ASI Corp bought products at inflated prices from Moneual, who turned around and used these transactions as a sign of a booming business to obtain loans from local banks.
The banks claim that both Newegg and ASI Corp colluded with Moneual when they accepted to buy products at inflated prices ranging from $2,530 to $2,980 for a home theatre personal computer (HTPC) that was actually worth only $8 per unit.
South Korean press reports that Moneual used these purchase orders to get loans of up to $3 billion from ten local banks between October 2007 and September 2014. The company defaulted on the loans in late 2014 and still owes $1 billion.
Last year, a Korean court sentenced Moneual's CEO, Park Hong-seok, to 23 years in prison, a sentence later reduced to 15 years.
After filing complaints against Moneual and its CEO in the country, four of the ten defrauded banks are now going after its collaborators.
According to the lawsuit, the four banks claim that "Moneual’s foreign importers [...] received kickbacks from Moneual in varying amounts in exchange for agreeing to collude with Moneual to defraud the Banks."
The lawsuit also names four ASI Corp executes, which according to allegations, "actively participated in the scheme to defraud the Banks and each of whom accepted hundreds of thousands, or millions, of dollars in kickbacks to do so."
The four banks claim they still have to recover $230 million from the hundreds of millions they loaned Moneual. The banks are looking to recover some of those funds from Newegg, ASI Corp, and the other defendants.
Newegg publicly denied any wrongdoing.