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Amazon allegedly scammed out of $370K by 22-year-old's return shipments of dirt (foxbusiness.com)
127 points by Vaslo on Aug 3, 2019 | hide | past | favorite | 107 comments



I just ordered a MyQ garage door hub from Amazon Warehouse (listed as missing or damaged original packaging). When I opened it up it felt a little off. The protective film on the device had obviously been removed and reattached and nothing fit very well in the designated slots in the packaging. The device itself had faint scratches and dust on it.

I decided to check the model number and sure enough, it was the previous model. Someone had obviously ordered the new model (presumably because the new one gained support for Apple HomeKit) then stuffed their old one in the box and done a refund through Amazon.

Amazon handled it fine and I got a replacement that was correct but now I'm pretty skeptical of how Amazon processes the returned items they place up for sale again.


I had a similar experience with an expensive Toto toilet seat from Amazon Warehouse Deals.

When it arrived, it was clear the packaging had been opened (which I expected), but:

- the toilet seat had signs of handling

- it didn't work when installed

- the previous purchasers return note was in the box. IIRC they said the reason for return was that they changed their mind about wanting it

My guess is that they bought a replacement on Amazon, and fraudulently sent back their old non-functioning one in the new packaging.

Amazon gave me a refund without fuss.


I buy many retuned items from Amazon warehouse. I find that about 5% of them are like this - people put either their old item or some other junk back in the box. Just happened again 2 days ago with a stroller my wife bought.


Similar experience with a sawhorse. It was clearly a used item when I opened it. I got a replacement no problem, how is it more cost effective to pay shipping twice than to pay someone to check it once?


The people that process the returns make next to nothing and run off a script of yes/no and anything weird gets escalated.

A Q/A person to validate a range of products for authenticity (or at least more so than now) likely costs more per hour.

They have their supply chain so efficient, it's likely very cheap for them to move physical items across the globe.


It would cost them $20/hr per validator (burdened).

If only 5 items an hour are bad returns, that's $4 per item identified.

It's likely cheaper to have you, the customer, do the valuation because you might not even realize the issues... And if you do, you might be too lazy to return it. Which further let's the value of hitting a validator.. so the employee would now be to probably find twice as many bad returns per hour for the company to break even.


Depends on the rate of the fraud. If, for example, 2 out of 10,000 returns are fraudulent, probably it costs lesser to process 2 replacements than check 10,000 items.


We got a child seat cover with a broken zipper and someone else’s name written on the tag.


Same here. TV from Amazon warehouse; no remote control. Who knows! Maybe the person needed just the 30$ remote :)


This is why we can’t have nice things. it’s upsetting that we have to build rules and laws around “worst” behaviors.


This reminds me of a story I read once of a guy who bought a 1000€ GPU from Amazon and got a 100€ GPU instead, obviously from a return. When he got to return it to get his 1000€ back, he was told that he had sent the wrong GPU, that it had been destroyed by them (like you would shred a sheet of paper) and asking for the right card to be sent to them.


Something similar happened to me when I was a teenager. I bought a 3dfx Voodoo card from Best Buy the day it came out and when I got home, it had a parallel printer port card in the box. After several arguments with managers went nowhere and I finally got a hold of the regional manager and got a replacement.

I thought the money I saved for so many months was lost. But alas, I was finally playing Quake deathmatch in glorious 3D after some heartache.


When I was a kid I had a family member who would perform these "swappy swaps" that you were the victim of.

He would go out and buy a new card, gently open the wrapper so that it could be melted back on with a heat gun, remove the card, replace it with something of similar weight, and reseal the package with a heat gun.

One time I ruined the wrapper on him and he had to take the item to Blockbuster. He made up some BS about it being a birthday gift that the wrong child opened and he needed to use the cellophane machine. It didn't work, and Best Buy wouldn't accept his return. That was one of the last times I saw him use that trick.

I also saw him sign up for a store credit card using someone else's social security information. His plan was to get approved, buy a TV, and then shred the card. Luckily for whoever SSN that was; their credit got denied on the application and he was unable to steal a TV.

Sorry to hear your Best Buy horror story, or to think that I saw that stuff go down. On the bright side my family member no longer engages in those types of transactions and mostly flies straight these days.


Oh, that’s interesting. Back then, I was sure that an employee made the switch because of just how flawless the packaging looked.

No judgement here. Pretty much everyone has done or is related to someone who does some sort of crappy thing(s).

“Swappy swaps” LOL


This is so bizarrely stupid, but it does lead to some questions:

1. What did this man think was going to happen? That Amazon would never open the boxes he returned? Certainly after 370k worth I'm surprised he didn't get flagged much earlier.

2. What normally happens to Amazon returns? The article makes it sound like they are rarely opened. That seems bizarre to me. I would have thought they'd have a system for processing returns.


> What did this man think was going to happen?

I think you're giving him too much credit. People try things. They repeat the things that work. Most thinking happens when the behavior stops working.

That's why long/broken feedback loops in systems are so dangerous. E.g., a big reason the Challenger disaster happened is NASA ignoring warning signs because they had gotten away with it before. If a zillion NASA engineers didn't really think it through when lives were on the line, it's no surprise some 22-year-old rando just kept doing the thing that worked.

Another good point for comparison is Theranos. How many people with advanced degrees worked there without ever catching on to how screwed they were? Without ever really verifying that it was a successful business that actually produced value for its customers? And that's just the obvious fraud. I've seen many insider stories here about startups that were only slightly less dubious.


> Theranos. How many people with advanced degrees worked there without ever catching on to how screwed they were?

Tons of people inside Thernos asked questions and then eventually left when they realized there was no answer. Especially the smart guys at the top who knew the most.

The book said the securty guy described an almost constant flow of people turning in their badges/fobs from getting fired by the Balwani guy. The team was constantly losing talent and replacing them... but they always had enough money, reputable backers, and positive PR to fool the rest and attract more.

Any lively business community with plenty of easy money floating around will attract a scammy subset. That's a human problem, not one unique to startups. Finance has plenty too, as does fracking, just like biotech did with Theranos. And it's a problem largely accounted for by established VCs as it's always a risk.


Sure, but there were also plenty of people who didn't leave.

And honestly, I think VCs are another good example of the problem here. They are notorious for being herd animals. They celebrate "pattern matching", by which they mean repeating the behaviors that previously led them to make money. If investors were all that good at thinking things through, they wouldn't have burned $1.4 billion dollars on Theranos.


There was always a chance that they make it. Every startup is just a nice wish, maybe a few good ideas, plus hopefully lucky and competent folks mixed with some money.

The idea is great, everyone wants a lab on a chip. MEMS is coming, etc. Someone will eventually make it.


There was never a chance that Theranos would make it, because, per POSIWID, the purpose of Theranos was not to make it. Anybody who talked like you did was fooling themselves because they liked the paychecks. Just like the Amazon thief.


What? Just throwing in some "systems thinking buzzword" is not a real argument.

I'm not aware we have definitive evidence that Theranos was intended to be a scam all along. So if it wasn't then it was intended to make it, no? Naturally, you can say that there was a tipping point, when they started to do the scam more than anything else. But that's not exactly the fault of the investment model, nor the fact that there's a big push to get microscale labs, because currently there's no consensus about it's impossibility (quite the contrary, though it's obviously quite a big challenge), so it makes sens to invest into a company that tries to do it.

Now, being inside and compromising one's integrity for paychecks is a different matter. On the one hand there are people in hard situations that change their thinking - but it's unlikely that qualified people were stuck there against their better wishes. On the other hand trying to get investors to choose you when every other company is also doing their very best to convince the investors leads to the usual fucked up borderline-lies / overpromises / demos (see also ghettotesting, see also MagicLeap.

I'm not trying to advocate somehow "overlooking" Theranos' misdeeds. I'm simply stating the obvious, that there was a chance. (After all, they got the money, the people, the vision. I also don't condone how they got the money, even if, as I mentioned, it's hard to get money while honesty is not exactly rewarded.)


> If investors were all that good at thinking things through, they wouldn't have burned $1.4 billion dollars on Theranos.

Some of the investors were old and they were just happy to have a relatively attractive woman founder.


Cant edit my comment but the journalist John Carreyrou who broke the story said that.


What was that saying again about how hard it is to get someone to realise something when their paycheck depends on them not realising it?


> a zillion NASA engineers didn't really think it through when lives were on the line

The in-depth investigation following the Challenger disaster [0] actually reached a slightly different conclusion: engineers tended to estimate ~1/100 launches would end in failure, while management estimates were about 3-6 orders of magnitude lower. The engineers did think it through; it was management that failed utterly and completely in their assigned task.

Anyway, I think your point is correct, but in this case it was management who learned that they could keep ignoring engineering expertise and get away with it until it literally blew up in their faces. Anyone who's had their boss urge them to rush bad code out the door (only to get chewed out when it fails as catastrophically as they knew it would) is familiar with this.

[0] https://en.wikipedia.org/wiki/Rogers_Commission_Report


Thanks for the correction.

But I'm not sure I agree with your diagnosis. I suppose it depends on how one thinks of engineers and software developers. Are we professionals, like doctors, with a bedrock responsibility to society and our users? Or are we just very well-paid gofers, who do whatever the bosses say?

In my view, responsibility isn't a zero-sum game. Sure, the managers failed. But the engineers also failed, and in the same way the Amazon thief did: they had reason to suspect consequences were coming, but they hung around because it was rewarding.


> Several of the [...] engineers stated their concerns about the O-rings and urged a delay, but the concerns didn't get communicated beyond the Level III Flight Readiness Review (FRR).

I think this is partially a fault of engineers, and/or the development/project model. They were not able to clearly state that no, it's a no-go, or yes, it's a go, they had "concerns". But that is probably useless. Therefore the problem is they lacked the conceptualization framework, a risk model, to state the severity of their concern, what is it based on, and someone should have been able to aggregate it and determine how this estimated risk influences the mission's overall risk.

That said, it is entirely the management's fault that they lacked this critical expertise/competence to manage risk and the project, and the engineers. (And naturally some of those managers themselves were engineers.)


I don't see any evidence in the Rogers report summary that management believed the launch failure rate would be 1 in 10^8. It seems like the report suggests a management belief of 1 in 10^5 (which is still fantastically and unjustifiably optimistic given the complexity and historical track record of space missions, of course).

The typical reliable car fails to about as frequently as 1 in 10,000.


Was Theranos a bad deal, or did the people who worked there get paid handsomely for their part in the fraud?


This. I wonder why those who worked there and were party to to it were not prosecuted in some way for their part in the deceit. They allowed it to continue by not whistleblowing the issues. They should be charged somehow.


I think a lot of the execs probably should be charged. And ditto for many of the lower-down workers as well if they participated in doing anything fraudulent.

However, I don't entirely want to blame the workers. US business culture very strongly leans towards a sort of neo-feudalism, where the CEO is always right, where one's allegiance is to the company, and where there are many techniques for silencing people. E.g., when I got laid off from Twitter they gave me zero notice, and made any severance conditional on signing a nondisclosure and nondisparagement agreement that went much further than the one I signed when I joined.

I had good savings and no family, so I turned them down. But a lot of people can't do that. Personally, I think we should make that illegal, and have every NDA specifically exempt reporting malfeasance.


They burned $1.4 billion dollars and produced nothing useful. It was bad.


"Bad" accurately describes Theranos's effect on society, but the comment you are replying to is probably asking about the effect of deciding to take a job at Theranos on the personal well-being of the individual making the decision.

After all, nobody is claiming that the Amazon dirt scam had a positive effect on society. The question in this thread was whether the dirt scammer's decisions were individually personally rational.

Your bringing up Theranos does not seem to me (and probably does not seem to grandparent) to shed any light on this question because it might have been individually personally rational for someone to take a job at Theranos: none of Theranos's non-management employees were required to give back their salary after Theranos was discovered to have been a fraud.


In both cases it was rational in the short term: the money kept coming in.

And "individually personally rational" is a weird way to say "greedy sociopath who only cares about how much money was pocketed".


Re amazon returns: either sent back to the third party seller or tossed into return pallets. If you watch some videos of them it becomes pretty clear amazon doesn’t check. A lot of electronics swapped out.


I've had multiple Amazon returns in which I dropped off the packages at a physical Amazon location, had them scanned, and received a paper receipt with the confirmation number. A few days later, look on your account and there has been no return. Try to look it up using the confirmation number and it doesn't exist. Open a customer support ticket, go back and forth a dozen times before they understand what you are trying to tell them, and all of the sudden the item is returned and you get your credit.

I think Amazon has a data loss problem in their returns processing, and this guy accidentally stumbled upon a way to trigger it repeatedly. And he only got caught when someone opened a box, got mad, and went out of their way to track down who mailed it to them.


Where I am, I usually drop off packages at a physical Amazon Location and I have an email about monies refunded to me before I get home.


For me returns and refunds consistently take over a week to register after the carrier tracking number shows delivery to Amazon returns center (Amazon provides no prepaid return labels for Finland).

I don't really mind, though.


2. Amazon kind of sorts them onto pallets that they eventually auction off, blindly. A lot of sellers buy these, like prepackaged storage lockers. They then sort through the junk, see what they can make a buck on, and resell on eBay or elsewhere.


Wow. That is... almost incomprehensible, how bad reverse logistics are that it’s not even worth opening the packages.

But then, where do the Amazon Warehouse deals come from?


I imagine depending on the country, and the price of the items, they probably open a selection of these packages to check to see it they can sell open package. But with the volume they’re pushing, its really hard to check every tiny thing.


That's the ultimate lost bet when bidding on Amazon returned merchandise. A pallet full of dirt likely in the boxes of expensive brand name items.


Based on the people I’ve seen doing it, they actually make quite a bit of money. You’ll find a few bad apples in the world, sure, but most of the time you’re not going to get people like this guy doing return scams at a scare large enough to impact the sheer size of Amazon’s operations.


scale large enough


> What did this man think was going to happen? That Amazon would never open the boxes he returned?

To be fair Amazon actually sells bags of dirt, so if there is just a bar code and a bag of dirt then the person opening the box might not think anything of it.


He just had the wrong scam. Buy high grade dirt, return low grade dirt. Buy high purity reagents, ...


I mean you could actually do that. They sell bags of dirt with gold flakes in it for kids to practice panning for gold, so you could buy that and take the gold out and return it.


You don't even have to bother with that. Amazon offers chemicals/stuff in 90/99/99.999% pure versions with associated non-linear pricing.


Everyone. Please do not do this. Please.


> To be fair Amazon actually sells bags of dirt

Amazon sell literal dirt? Why? What does anyone buy that for?


When you see dirt around you in the world what is usually used for? Who uses it and are there other uses that occur out of sight but which are fundamentally essential for human survival?


I’ve no idea why anyone would need to use dirt. You’ll have to explain like I’m five, sorry.


Farming, landscaping, gardening.


People don't use dirt for that - they use compost, soil, earth, sand, gravel, things like that.


I'm guessing you're in the UK? In most (all?) of the US "Dirt" and "Soil" are used interchangeably in casual conversation, with "Dirt" actually being the more common. "Soil" is only more common when referring specifically to tilled soil, or bagged potting soil. But even those will often be refereed to casually as "Dirt".


planting things..? Like flowers...?


You’d plant them in soil. You’re not going to put a plant in dirt are you?


Not applauding his fraud (although a part of me always enjoys stories like this), but I bet it started like, “hmm I wonder if this would work,” on one package, and then a few hundred thousand dollars later...


I’m sure he got flagged many times and used several accounts for this scheme.

Amazon bans you very fast for high return rates like this.


Given that they got away with it for long enough to scam them for $370k worth of merchandise, I'd say their assumption of what was going to happen was more accurate than most people's assumption of what was going to happen.


The first article that reported this [1] has way more info on what he did with the money and how he fenced it and how he was caught (this is auto-translated so I have no idea how accurate it is since I don't speak spanish):

>The scam didn't end there. So many times they repeated the scam, which were made with a huge amount of electronics. They could keep them ... or they could further stretch the deception. And that's what they did. James set up an online sales company. A kind of Wallapop to which he named Kwartech, a fusion of his surname Kwarteng and the word tech (technology in English). They founded a Limited Company that served to sell the merchandise online. They offered unused products, but without a package (which was back in Amazon full of land, a fact that they did not tell their customers) and at a very reduced price.

>The Barcelona police began the investigation, which immediately passed to the Group of Technological Crimes of the Upper Balearic Headquarters. Agents arrested them both last week. They have passed to judicial disposition and have left free with a deposit of 3,000 euros. They are on the street, waiting for the final trial ... and with their Amazon accounts closed. And is that between James and Juan have hit the biggest stick that has ever been given to Amazon in Europe.

[1] https://www.elespanol.com/reportajes/20190723/estafo-james-a...


I've encountered another scam regarding Amazon returns where the seller would ship from overseas. The item I ordered would be nothing like the description. So I filed for a refund and the seller was like "sure, here's the form and you can pay for shipping". As you can imagine because of the postage rates differences, it was a lot more expensive for me to send it back vs. the cost to them to ship to the US. In fact the shipping cost was almost the cost of the item.

I contacted Amazon customer service and they issued me the refund without requiring me to send anything back but I wonder how many people just gave up. Amazon's customer service is a huge part of the reason I order so much through them. I feel comfortable buying things off of Amazon and has never had to "eat the cost" of shady sellers.


>> Amazon's customer service is a huge part of the reason I order so much through them.

Do i have time to go through multiple cycles of "get crap / return" until i get item I ordered?

That's why I check more reputable stores first such as B&H first before succumbing to AMZN hit-n-miss-n-get-refund store.


> Do i have time to go through multiple cycles of "get crap / return" until i get item I ordered?

I do. Been ordering from Amazon since the 90's - my total purchases have exceeded 5 figures USD for many years - and I don't think I need more than one hand worth of fingers to count the mistaken items I've received.


This comment would make much more sense if AMZNs fuckup rates were much higher.


I don't think the point is about AMZN "fuckup rates" or "mistaken items" it's about outright fraud. I've received a fairly high percentage of just outright fake or broken stuff. Maybe I bargain hunt a bit too much . . . .


I’d estimate that I need to complain about approx 1% of the stuff I order from amazon.

I guess YMMV, but I feel like I’d spend much more time if I shopped around for alternatives.


You are lucky it's ordered through Amazon, had it been ordered on their own websites full of English errors, it will be the same response but no easy refund, after lengthy back and forth hassle with Paypal and credit card company you'd be lucky to have your money back.

While for these scammers, it's a super lucrative business, their whole cost is no more than 1 dollar, that means they can make money as long as not every single order was refunded.


My family run a business that partially operates through eBay and this kind of crap happens to them quite regularly. They get variations of:

* Returning (literal) rubbish to make up the weight

* Returning the parts when they break them trying to use them

* Returning the old parts they are replacing with the new parts they purchased

* Returning parts they didn't check before purchasing and getting a full refund (including postage), by claiming the item wasn't as described

* Claiming the parcel wasn't delivered, despite the courier company having a signature showing it was (one trick they use is to make sure the parcel is delivered to a neighbour)

The worst part? There is no method to fight this. Neither eBay, the delivery companies or PayPal will take responsibility for the costs, despite claiming they do. It doesn't matter what evidence you submit (pictures, videos, third part testimony, etc), the result is the same. The "funny" part is that some items they refuse to deliver without insurance (which has to be with them) and then when you go to claim, it's not possible.

The delivery companies are also great to deal with:

* Parcels arrive broken despite adequate packaging (for example, somebody has run over the item with a fork lift)

* Parcels get lost despite purchasing tracking - you phone them up and they have zero idea where the parcel went

As somebody who gets parcels delivered, occasionally the delivery companies will deliver the item with some tape showing that it's broken. Their advice is not to accept the item, which only works when you're actually in - but then if you are, they refuse to send the item back anyway. This is because the delivery drivers only get paid for delivered items, so it's the end-courier that gets screwed.

Anyway, my point is that somebody like Amazon who mostly acts as a trading platform these days and facilitates this crap that sellers have to put up with - I really don't feel sorry for them.


> * Claiming the parcel wasn't delivered, despite the courier company having a signature showing it was (one trick they use is to make sure the parcel is delivered to a neighbour)

Watch out for this one though, some delivery companies are just terrible at locating the real address and will send the parcel anywhere.


For sure. It seems to be particularly bad when the parcels go international and the courier companies don't communicate particularly well. Trying to keep things tracked when the parcel goes abroad is difficult (because you also have to deal with customers asking "where is my parcel now?").


Things must have changed lately. I returned a set of DVDs and forgot to include the cover and got dinged for over half the cost of the item almost as soon as it was received by the warehouse. I guess I got lucky since they could have charged me for the whole price. But now a guy is sending dirt and he gets full credit. Wow!


IIRC unsealed media (DVDs, CDs,...) are only refunded by 50% so that people don't just make a copy.


Amazon, I believe, checks for the weight of the package to ascertain if the contents are what they were supposed to be.


A missing DVD cover discovered by a weight discrepancy?

Who’s to say it was returned in the original envelope?

Perhaps more likely the extremely light items weight is hidden in the variance of the return packaging weight and so those packages have to be opened?


A missing cover sounds like it would be visible without opening the product packaging (which would be the cover itself, no?), i.e. they can easily notice the omission by comparing the returned item against a reference image.

In the OP case the product packaging was filled with dirt, which is not as easily discoverable without opening product packaging.


Ah, they open the shipping envelope. They don’t open the product box itself. Of course.


Source


When you open the case, the nitrogen gas which was included to help avoid decomposition escapes, hence the half refund.


“The report states the success of the alleged scam by Kwarteng, who has been released on bail, enabled him to create his own company.”

That’s one way to get seed funding I guess...


This was my favorite part of the article. It honestly reads like somehow what he did was a brilliant business idea, but incidentally was illegal


I'm curious why Amazon didn't investigate what was happening until his returns totaled $370k.


I'm curious how it even totaled 370k. Returning enough items to get that high should set off alarms!


Forget returning that much. Even just spending that much at Amazon to begin with should set off an alarms, e.g. is this a stolen card? money laundering?


No way, I've spent that much on Amazon and I buy nearly everything on Amazon. Pretty sure there are many others who shop at that level or beyond.


You could buy a house with what you’ve spent on Amazon!


Due to scale and efficiency, they simply operate via check list approach.

When I had an ecom company, a line worker used to check the package content and appearance (dents/scratches) and then he would measure it on a scale and check with the package's recorded weight before it was dispatched and algorithm would flag the orders where weight varied more than some specific ratio.

It was pretty rudimentary but worked at scale just fine.

Now, Amazon must also be using something like this.


This is the same problem that Archimedes was trying to solve.

Except now we have radar and 3D imaging.

Is Amazon actually involved in technology?


Because he most likely used tens if not hundreds of accounts to accomplish this.


This the kind of thing you could probably get away with once or twice... I don't know why he thought he could get away with it for hundreds of thousands of dollars.


This is why we can’t have nice things.


Sounds like a shitty platitude but yeah, this is why I fear Amazon will eventually reconsider their returns policy.


Reminded me of this guy who got rocks instead of a camera...

https://youtu.be/DXPnOq-XJg8


absolute legend tbh


Retail is a dirty business.


Wow, this is brilliant.


Leveraging Amazon's disinterest in its own processes, to the MAXIMUM effect, surely is brilliant social engineering. It required knowing how return products are handled and treated, which is basically "they are weighed and forgotten in a lottery/auction". The exploitation of existing policies and practices was foiled by greed. Not enough to order products to keep, he had to try to make a business of it.


Presumably you are being sarcastic? There was no way he wasn’t going to get caught eventually.


Found a member of HN who can perceive humor, +1 for you my friend ;)


Yeah, well, he forgot the part about using a fake identity.


Except for the part that leaves an obvious paper trail.


Well, it _was_ brilliant, but the alleged perp got caught. Good luck now.


By this logic, everything is brilliant until it's not. That's not a good way to define "brilliant". Actions that eventually net undesirable consequences are stupid, not brilliant.

E.g. Being a petty armed bank robber isn't brilliant until you get caught.


> Actions that eventually net undesirable consequences are stupid, not brilliant.

I think it depends on how predictable the consequences are (it may be brilliant, or at least smart, to act in a way that offers a small possibility of an undesireable consequence in return for a large possibility of a highly desireable one), and on how long the time horizon is (it may be brilliant, or at least smart, to act in a way that offers certain undesireable consequences much later in return for certain desireable consequences for a long time before that). To overstate the objection, all actions eventually result in death, which is presumably undesireable.



> small possibility of an undesireable consequence in return for a large possibility of a highly desireable one

Exactly, so the expectation value is net desirable. I wouldn't consider that stupid.


Good on this guy. If you don't bother with or are just incapable of verifying returns, you shouldn't be selling anything. If a normal person tried running their business that way they would be ruined.




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