A third-party seller on Amazon.com was sentenced today to 18 months in federal prison for gaming the online retailer’s payment system in a scheme that defrauded the company out of more than $1.3 million.
Ting Hong Yeung, 40, of Hacienda Heights, was sentenced by United States District Judge Stephen V. Wilson, who also ordered him to pay $1,302,954 in restitution.
Yeung pleaded guilty on June 6 to one count of wire fraud.
Amazon allows third-party sellers to use its online retail platform to advertise items, make sales and communicate with customers. Ordinarily, when an Amazon customer purchases an item listed by a third-party seller, Amazon credits the third-party seller’s internal Amazon account for the amount of that purchase. About every two weeks, Amazon disburses into the seller’s bank account the proceeds of those sales for which the seller has provided proof that the items purchased have been shipped – namely, the shipment tracking numbers.
Yeung operated as an Amazon third-party vendor using business names including “Speedy Checkout,” “Special SaleS” and “California Red Trading Inc.” After enough time passed to allow his businesses to appear to be reputable vendors, Yeung would list expensive merchandise, such as furniture and home décor, at cut-rate prices to drive a spike in sales.
However, instead of shipping purchased items to the customers, Yeung provided Amazon with bogus tracking numbers. When customers complained about not receiving their purchases, Yeung delayed customer refund requests long enough to ensure that Amazon would disburse funds into his businesses’ bank accounts. As a result, Yeung collected payment for items that were never shipped and relied on Amazon to issue refunds to his disgruntled customers under its “A-to-z Guarantee.”
In some instances, instead of sending customers the products they ordered, Yeung shipped them cheap crystal ornaments, which served the dual purpose of generating tracking numbers that induced Amazon to disburse customer funds and forestalling customer complaints and demands for refunds. Yeung also used Amazon’s Buyer-Seller Messaging Service to convince customers that their orders were on their way when, in fact, they were not.
On occasion, Yeung provided goods to his customers that he obtained through his own fraudulent purchases from Amazon, which he made using credit cards in the names of other people and fictitious identities. After the goods were delivered to his customers, Yeung requested refunds for the goods from Amazon. Yeung often falsely claimed that he was entitled to a refund because the product was “Different from what was ordered,” and then returned lower-value items rather than the merchandise he had originally ordered. As a result, Yeung received both the refund and the proceeds of the original sale to his own customer.
“[Yeung] perpetrated his fraud over the course of roughly seven years, collecting more than $1.3 million,” prosecutors argued in a sentencing memorandum. “He forced his victim into an elaborate game of Whac-A-Mole: when Amazon uncovered and shut down a fraud scheme involving one of defendant’s companies, he simply began it anew with another.”
Yeung has admitted causing Amazon to suffer approximately $1,302,954 in losses. He has agreed to pay restitution, some of which will be paid with gold and silver bars that investigators seized during a search of his residence in February 2022.
The FBI investigated this matter and received cooperation from Amazon.
Assistant United States Attorney Alexander B. Schwab of the Major Frauds Section prosecuted this case.