Counterfeit sneakers are a $450 billion market—a menace to the economy, generally, and intellectual property rights more specifically. But the world of fraudulent goods remains a highly opaque one, from the manufacturing process to the retailers that stock them: it’s often easier to buy a pair of fakes than it is to learn where they come from.
A federal complaint unsealed late last month (and first reported on by Quartz) shows how counterfeit sneakers, like Nikes and Louis Vuittons, come into the United States, revealing an elaborate system of fraudulence, burner phones, and helpless importers of decorative glass vases and napkins.
Between February 2012 and December 2016, the United States Department of Homeland Security reports, a Chinese national, Qing Fu Zeng, smuggled 22 40-foot shipping containers by sea, depositing them in ports in New Jersey, New York, and Los Angeles. The manifests for these containers stated that they were packed with napkins or glass vases, but x-rays and law enforcement examinations revealed that they were in fact filled with “shoes consistent in appearance with Nike and Louis Vuitton sneakers.” The investigators worked with authorized representatives of the brands to confirm that they were indeed counterfeit. Had they been real, the complaint reads, they would have been worth more than $472,000,000. The sneaker market: huge. The fake sneaker market: perhaps even huger.
The process of bringing the sneakers into the United States required a web of fraud, and a network of complicit retailers and interlocutors throughout the New York area and in greater Los Angeles. The original complaint, which was unsealed upon Zeng’s arrest on December 26, at Dulles airport in Washington, D.C., explains in detail how “Ray,” as Zeng’s associates called him, would ship containers of the counterfeit sneakers to both coasts from China. Zeng illegally obtained Employer Identification Numbers (EINs, or the numbers the IRS uses to identify businesses), and listed those legitimate businesses as the consignee or buyer of the goods on the shipping manifests, but provided false contact information that led to burner accounts owned by Zeng.
For example, Zeng is believed to have created a burner email for a legitimate business, CYS Excel, Inc., which, according to its website, imports high-end, elaborate vases, apothecary jars, candle holders, and terrariums (you know, the kinds of things you could use to start, say, a popular hot wax meditation studio to fund your thirst for real Vuitton kicks). He put CYS’s name and address, along with a burner email and phone number leading to one of his associates, on the manifest for a shipping container sent to New Jersey and said to hold 1,134 cartons of glass vases, but which was actually filled with fake Nikes.
Instead of delivering them to the addresses listed on the manifest, the burner contacts had the containers sent to warehouses and self-storage facilities in Brooklyn, Queens, or Long Island, where the shoes were then delivered to wholesalers and retailers. The investigators partnered with a cooperating defendant, who assisted Zeng in the scheme, to provide information; law enforcement officials discovered that he was paid thousands of dollars in remotely refillable Chinese debit cards.
Of course, the revelations raise more questions about the world of counterfeit sneakers. How good were the fakes? Who decides what’s worth copying, and how? Were they sold in the stores as legitimate merchandise? (There’s a gray market for knowingly fake sneakers, after all.) And for how much? The complaint mentions that the cooperating defendant met with a retailer in Flushing, Queens, but what is the extent of the network to which these shoes were being disbursed? And what about the factories in which they were made? It’s common knowledge in the world of fashion labor that counterfeit goods are sometimes made alongside the real products.
Zeng was transferred back to New York on Tuesday of this week, according to the U.S. Attorney’s Office in Brooklyn. There was no information available about his attorney or trial.
Originally Appeared on GQ