Chinese National Charged for Selling $23.8M in Counterfeit Goods on Amazon, eBay

A federal grand jury has indicted a Chinese national in California for allegedly participating in a $23.8 million scheme to manufacture and sell Chinese counterfeit products on eBay and Amazon, the Justice Department announced on Dec. 19.

Cai Zhoulin, also known as Allen Cai, was arrested on the morning of Dec. 19 in his residence in Los Angeles. The three-count indictment accused Cai of trafficking and selling to eBay and Amazon customers counterfeit batteries that could contain safety risks.

The charges against Cai include trafficking counterfeit goods and labels, committing wire fraud and mail fraud, and conspiracy to engage in money laundering. If convicted of all charges, Cai could spend up to 50 years in federal prison.

According to the indictment, the 28-year-old Cai had worked for a China-based company called Shenzhen Theseus Technology Co. Ltd., before moving to Los Angeles County in 2012. The company, owned and operated by Cai’s relatives, manufactured fake lithium-ion batteries, including those designed for laptops.

Cai and co-conspirators would export these batteries from China to the United States, and re-sell them as “new, genuine, original” brand-name products, using business names such as 3D Supply Inc., Cycle Technology Inc., E-Family USA Inc., and “Everlast Group Inc., according to the court document.

The international brands affected by the counterfeit scheme include Apple, Dell, HP, and Toshiba.

To make the shipment less conspicuous and thus evade customs inspections, Cai and co-conspirators would occasionally cover trademarks with black tape, or ship the brand labels separately from the products before adding on the logos at Cai’s warehouse in La Puente, California, the court document said.

An eBay spokesperson told The Epoch Times in an email that anti-counterfeiting is “an area we continue to invest heavily in,” adding that the company has partnered with “rights owners, law enforcement and government officials to ensure a safe shopping experience.”

Amazon did not immediately respond to a request for comment.

Significant Safety Risks

A number of buyers had returned the batteries to Cai’s warehouse and asked for a refund upon finding the laptop batteries to be fake, according to the indictment.

The indictment named five U.S.-based victims of the fraudulent scheme who purchased batteries through eBay.

The prosecutors warned that counterfeit lithium batteries that Cai and his partners sold “frequently lacked required essential internal safeguards,” exposing customers to significant risks of fire and explosion.

M.O., one of the victims, complained that the fake Toshiba battery caused the laptop to start emitting smoke and nearly catch fire. The incident damaged the laptop’s charging port, the indictment. said.

“Counterfeit goods are not manufactured with the same care as legitimate products backed by well-known companies and their highly developed intellectual property,” Tracy Wilkison, First Assistant U.S. Attorney, said in a statement.

Mark Zito, acting special agent in charge for Homeland Security Investigations Los Angeles, said that the conspirators, rather than consumers, “are the ones who may pay the steep price.”

“These fakes have no place in a fair, legitimate marketplace,” he said.

Cai and others received about $23.8 million from the sale of such batteries, a vast majority of which was sent back to Chinese banks through wire transfers, the indictment said. Prosecutors said Cai himself had used the proceeds for personal expenses such as rent, mortgage payments, and monthly lease of a Maserati sports car.

The prosecutors would confiscate Cai’s property in Rancho Cucamonga, California, as well as his rights in any other properties derived from the illegal proceeds in the event of a conviction.

Chinese National Pleads Guilty to Federal Mail Fraud

On Dec. 19, another Chinese national residing in California pleaded guilty to federal mail fraud charges relating to the sale of counterfeit goods.

Xu Xiaoying, 34, admitted to having defrauded customers by selling fake Pandora jewelry and Ray-Ban sunglasses. The total worth of the products amounted to $2,322,845, prosecutors said.

From around August 2016 to April 2019, Xu and partners imported fake goods from Hong Kong and China to his residence and El Monte and Alhambra, California, where she repackaged them for sale.

Xu faces a maximum of 25 years in jail for conspiracy and mail fraud. Sentencing is set for March 2020.

“The sale of counterfeit goods not only defrauds consumers and legitimate companies, but results in American jobs lost, American business profits stolen, and American consumers tricked into receiving substandard products,” U.S. Attorney Robert K. Hur said in a statement.

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Author: Eva Fu