A newly unsealed federal complaint sheds light on how one counterfeit ring used burner phones, phony businesses and more than a dozen shipping containers to smuggle $472 million worth of suspect sneakers into the U.S.
According to the complaint filed on Dec. 6 by the U.S. government in collaboration with its Homeland Security Investigations (HSI) and Customs and Border Protection (CBP) agencies, a sneaker ring run by an individual named Qing Fu Zeng, a Chinese national who goes by the alias “Ray,” was busted at the conclusion of an investigation that began in early 2012. Over that period, investigators seized approximately 17 40-foot shipping containers transported by sea from China into either the Port of New York or the Port of New Jersey.
However, HSI permitted five additional containers to pass through customs in order to track where they ended up.
“Ultimately, the shipping containers loaded with the counterfeit goods were never sent to the legitimate businesses listed on the manifests,” HSI special agent Katherine Kearne wrote in the report. “Instead, once released from the port, the containers were shipped to various self-storage facilities within Brooklyn, Queens and Long Island, New York, where their contents were sub-divided for sale and delivery to wholesalers and retailers.”‘
All 22 containers seized or accounted for in the investigation held an estimated $472 million worth of Nike and Louis Vuitton sneakers, among other items. In addition, the HSI and CBP have linked 107 more shipping containers to the ring based on “nearly identical manifests” and the fact that the containers were set to be delivered to the same recipients named in the initial investigation.
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Zeng and his organization used fraudulent company names and contact information paired with authentic Employer Identification Numbers (EINs) in order to give the operation the appearance of legitimacy.
However, further investigation revealed that the phone numbers and email addresses provided did not link to any legitimate businesses. Instead, they were connected to a number of constantly shifting email accounts and “burner” phones, cheap cell phones meant to be used for a short time and discarded, and often used by criminals to obfuscate their activities.
A major breakthrough in the case occurred when HSI and CBP authorities examined a container in Los Angeles that was said to contain napkins. Instead, their X-rays found boxes of sneakers and jeans, and the agencies subsequently worked with Nike to determine the products were indeed counterfeit.
“On or about April 4, 2019, HSI and CBP officers examined the Los Angeles Shipping Container,” the complaint read. “Upon opening the tail of the Los Angeles Shipping Container, the HSI and CBP officers discovered two rows of boxes containing generic shoes and, behind that, shoes consistent in appearance with Nike sneakers. An X-ray examination revealed that the entirety of the contents of the Los Angeles Shipping Container were consistent in appearance with either boxes of sneakers or boxes of jeans, not napkins, as the shipment was manifested as containing.”
According to NBC New York, Zeng was arrested at Dulles International Airport in Washington D.C., on Dec. 27.
In December, Senators Thom Tillis (R-NC), Chris Coons (D-DE), Bill Cassidy (R-LA) and Mazie Hirono (D-HI) introduced a bill designed to increase the power of the CBP to protect intellectual property rights at the border amid a growing influx of counterfeit goods.