Feds: Third-party seller gamed refund systems to defraud Amazon of $1.3 million

A Hacienda Heights man who worked as a third-party seller on Amazon admitted to gaming the online retail giant's payment and refund system to defraud the company of more than $1.3 million, federal prosectors said.

Ting Hong Yeung, 41, struck a plea deal with with the Justice Department this week, agreeing to plead guilty to wire fraud and admitting he caused Amazon approximately $1.3 million in losses. Prosecutors say Yeung had operated as a third-party vendor under business names including "Speedy Checkout, "Special SaleS," and "California Red Trading Inc."

Third-party sellers on Amazon are credited every two weeks by the company's internal account for purchases made on its platform once the seller has provided shipment tracking numbers. Prosecutors say Yeung first solidified his position as a reputable seller on Amazon, then started listing expensive merchandise like furniture and home decor at cut-rate prices to drive a spike in sales. But instead of shipping the items to the customers, Yeung would give Amazon bogus tracking numbers and delay customer refund requests long enough to make sure he would still get Amazon's payments disbursed into his bank accounts, according to prosecutors.

"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,' prosecutors said in a statement.

The tracking numbers were not always bogus — in one instance, prosecutors say the shipment was cheap crystal ornaments thhat weren't ordered, so a tracking number would be generated. Yeung also allegedly used Amazon's buyer-seller messaging service to convince customers that their orders were on their way and occasionally provided goods that he obtained through his own fraudulent purchases from Amazon, made using credit cards in the names of other people and fictitious identities, according to the Department of Justice.

"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," prosecutors said. "As a result, Yeung received both the refund and the proceeds of the original sale to his own customer."

Yeung has agreed to pay restitution in the case, some of which will be paid with gold and silver bars that were seized from his home in a search last month. He is scheduled to make his first appearance in the case on April 12.