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In 2018, police showed up at a nondescript industrial warehouse in New York’s Brooklyn Navy Yard to investigate reported counterfeits. 

Federal agents were looking for knockoff military gear as part of an investigation into a distributor, called California Surplus, that had secured a $20 million contract to supply the U.S. military with specialized uniforms. They’d already recovered thousands of boxes of the stuff from a nearby New Jersey warehouse, according to court documents. 

California Surplus, it turned out, was selling Chinese-made counterfeit goods designed to look like gear from one of the top military outfitters in America, Crye Precision. Crye’s Brooklyn headquarters happened to be located just around the block.

The owner of California Surplus, Ramin Kohanbash, and co-conspirator Bernard Klein pleaded guilty in 2019 to trafficking counterfeit goods and were given jail time.

Counterfeiting has ballooned into a massive problem for Crye, costing it millions of dollars a year, said Jonathan Antone, the company’s general counsel. Crye loses out on valuable sales to unlicensed mills overseas that print copies of its patented camouflage, called MultiCam, on ponchos, pants, shirts and hats that sell on Amazon and other marketplaces without Crye’s permission.

Crye Precision gave CNBC a tour of its warehouse in Brooklyn, New York, on August 7, 2024, where it tests suspected counterfeit items for authenticity.

Launched in 2000, Amazon’s marketplace allows businesses to hawk their goods on the company’s site. It’s amassed millions of sellers, and now accounts for more than half of Amazon’s overall retail sales volume. While the marketplace has helped Amazon bring in record revenue, it’s also been found to host counterfeit, unsafe and even expired goods.

By 2016, sellers were speaking out about Amazon’s growing counterfeit problem, telling CNBC of the company’s effort to openly court Chinese manufacturers. Sales from Chinese-based sellers on the site more than doubled in 2015 .

Counterfeits became a more frequent problem on Amazon and across the internet as the pandemic supercharged online shopping, said Jason Goldberg, chief commerce strategy officer at advertising firm Publicis. And unlike brick-and-mortar stores, which may offer up to 150,000 products, online marketplaces like Amazon can carry hundreds of millions of items, Goldberg said. That vast selection can be harder for platforms to police.

“There’s a lot more space on that digital shelf for potential counterfeit products,” he added.

‘Disrupting and dismantling’ counterfeiters

Amazon has rolled out tools like Project Zero and Brand Registry that let brands report and remove suspected counterfeits themselves. In 2020, it launched an internal division , called the Counterfeit Crimes Unit, that partners with brands and law enforcement agencies to take on fraudsters.

The team, which now includes 35 people, is made up of data analysts, investigators and former federal prosecutors, many of whom previously worked for the Justice Department and FBI. Amazon recently invited CNBC to its second headquarters in Arlington, Virginia, to learn more about how the CCU investigates counterfeits on the company’s marketplace.

Kebharu Smith, who heads up the CCU, said the division was launched at the request of Amazon founder Jeff Bezos, who was CEO until 2021. Bezos felt the company needed to have a team of former prosecutors and experts to “disrupt and dismantle” counterfeiting organizations, Smith said.

“Counterfeiting is an industry that totals around $500 billion in sales, and so we know that it’s going to take a coordinated effort among brands, law enforcement and partnerships with stakeholders to go after these bad actors at scale,” Smith said. “We’re not just focusing on the sellers in the Amazon store who we identify as bad actors, but the supply chain to knock out that network.”

In 2023, Amazon says it partnered with law enforcement around the world to seize 7 million counterfeit products and execute more than 50 raids, spending $1.2 billion and employing 15,000 people to make it happen.

Before the CCU’s launch, Amazon’s anti-counterfeit efforts were largely driven by its customer trust team, which oversees the company’s response to myriad abuse and fraud issues, like fake reviews and bad actors who look to skirt its policies .

Through the CCU, Amazon teams up with companies like Prada, Hanesbrands and Yeti to take counterfeiters to court. In March, it filed a lawsuit with Crye against six companies and 16 individuals allegedly involved in a scheme to sell knockoff versions of the equipment maker’s MultiCam product on Amazon’s marketplace. The items included camping, hunting and traveling bags and backpacks emblazoned with fake versions of Crye’s camouflage pattern.

An example of a backpack previously sold on Amazon that bore a fake version of Crye Precision’s MultiCam pattern.

Amazon

The CCU also passes leads on suspected bad actors to government agencies. In August 2023, federal agents from Homeland Security and the Department of Defense acted on information from Crye and Amazon to raid facilities in Texas and California. Agents seized “multiple tractor trailer loads” of counterfeit MultiCam products, estimated to be worth $8 million, according to court documents.

For many brands, the process of identifying counterfeits starts with conducting test purchases of products online.

“To the untrained eye, it might appear to be MultiCam, just as is our MultiCam, but it doesn’t look right to us,” Antone said. “So we will just order some test purchases and we’ll analyze them and often can almost immediately say this is easily counterfeit.”

Crye showed CNBC examples of counterfeit MultiCam products that were allegedly sold by retailer L&Q Tactical, one of the defendants in the lawsuit, on Amazon. Among the products were tactical vests, backpacks and plate carriers, which Crye identified as knockoffs due to inconsistencies in coloring with its MultiCam pattern. L&Q included the keyword “MultiCam” in some Amazon product listings even though they weren’t affiliated with Crye, listings show. L&Q didn’t respond to a request for comment.

“They were trying to bid on military contracts as well with these counterfeit items,” Ernesto Rodriguez, Crye’s MultiCam brand manager, said in an interview. “Fortunately for us, they don’t do a good job of trying to knock off our pattern.”

Crye Precision’s Ernesto Rodriguez shows off a genuine MultiCam backpack (left) and what he calls a “very bad knock-off” (right) in Brooklyn, New York, on August 7, 2024.

Fake backpacks, Apple chargers

When users post fake products on Amazon or elsewhere on the internet, they both threaten to damage a brand’s reputation and present a potential danger to consumers. In Crye’s case, counterfeit versions of its product could end up putting soldiers or police officers’ lives at risk, Rodriguez said. Crye tested the L&Q items with night vision goggles and found they wouldn’t properly conceal a soldier on a battlefield.

“When viewed under night vision, it’s glowing a solid white,” Rodriguez said. “So if a soldier was having this bag on his back or carrying it, it can be seen from miles away.”

The potential for counterfeits on Amazon has created friction with some brands. Over the years, brands including Birkenstock, Nike and Ikea have all quit selling directly on Amazon, pointing to counterfeits and the wild west nature of the marketplace.

Apple in 2016 sued an Amazon seller for selling fake chargers imprinted with its logo that it said “pose a significant risk of overheating, fire, and electrical shock.” Now a seller consultant, Rachel Greer worked in Amazon’s fraud and product safety departments from roughly 2007 to 2015. Around 2013, Greer recalls a case where a U.K. consumer died after being electrocuted from a knockoff Apple charger.

“[The charger] would plug in, sure,” Greer said in an interview. “But then it would zap you really hard because there was no insulation.”

Apple products are now a restricted category on Amazon, meaning resellers have to get approval from the brand to sell those products on the site. Amazon didn’t provide a comment on the U.K. incident. Smith said the company has identified bad actors who use fictitious IDs to set up accounts and sell in restricted, or “gated,” categories.

“We’ve identified schemes such as un-gating schemes, where bad actors will submit fake invoices as a way to get past our proactive tools,” Smith said.

Goldberg said that while counterfeits have become less prevalent on Amazon, “dupes,” or cheaper imitations of popular products, have become increasingly common. Roughly one-third of U.S. adults have intentionally bought a dupe, according to a 2023 Morning Consult study. Buying a knockoff isn’t as taboo as it was in the past, Goldberg said.

“Increasingly today, there are consumers that say, ‘Oh yes, I’m fiscally responsible and frugal. I would never buy that very expensive bag with a Coach logo on it, but I do like that aesthetic. And I was happy to find a bag without the Coach logo that had the same aesthetic on Temu for 10% of the cost,” he said.

Temu, Shein and TikTok Shop have become shopping destinations in the U.S. in recent years, luring American shoppers with their rock-bottom prices on clothing, electronics, home goods and other products. Much of the merchandise is unbranded products that are shipped direct from China.

Amazon has taken notice. The company is in the process of launching its own dedicated storefront for low-priced fashion and lifestyle items that will allow Chinese sellers to ship directly to U.S. consumers, CNBC previously reported. In an effort to remain competitive, the company has set caps on where sellers can price their goods, such as a $20 limit for couches and $9 for bedding sets, according to The Information.

The rise of online marketplaces has made it harder for companies to have “perfect brand safety,” Goldberg said.

“I would honestly characterize it as kind of the new reality in retail,” he added. “Consumers are discovering stuff on TikTok instead of on our store shelves and buying across all these platforms. The world is just more complicated and messy, and perfection is a further away goal than it ever was before.”

Watch the video for a behind-the-scenes look at how Amazon is fighting counterfeits.

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Jeff Bezos, Sam Altman, Sundar Pichai and other tech leaders congratulate Trump on election win

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November 6, 2024

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Jeff Bezos, Sam Altman, Sundar Pichai and other tech leaders congratulate Trump on election win

Sam Altman, CEO of OpenAI, attends the 54th annual meeting of the World Economic Forum, in Davos, Switzerland, January 18, 2024 (L), and Amazon CEO Jeff Bezos speaks during the UN Climate Change Conference (COP26) in Glasgow, Scotland, Britain, November 2, 2021.

Reuters

Leaders of major technology companies congratulated President-elect Donald Trump and Vice President-elect JD Vance on their victory in the U.S. presidential election Wednesday.

The messages were similar, with CEOs remarking that they wish Trump success when he returns to the Oval Office, and look forward to working with his administration.

Amazon founder and executive chairman Jeff Bezos celebrated Trump’s win in a post on X, calling it an “extraordinary political comeback and decisive victory.”

Bezos, who also owns The Washington Post and founded space company Blue Origin, has had a rocky relationship with Trump and was a frequent target of the former president during his first term. Trump repeatedly took aim at Bezos’ ownership of the Post, Amazon’s tax record and its relationship with the Postal Service. Bezos also took swings at Trump, remarking in a 2015 social media post, “#sendDonaldtospace.” Bezos recently struck a more conciliatory tone and in July praised Trump for his “courage under literal fire” following the attempted assassination of Trump at a Pennsylvania rally that month. Bezos has posted twice on X this year, with both posts mentioning Trump.

Andy Jassy, who took the helm from Bezos when he stepped down as Amazon’s CEO in 2021, also extended his congratulations to Trump.

“Congratulations to President-elect @realDonaldTrump on a hard-fought victory,” Jassy wrote in a post on X. “We look forward to working with you and your administration on issues important to our customers, employees, communities, and country.”

OpenAI CEO Sam Altman said in a post on X that he hopes Trump will see “huge success in the job.” In a follow up post, he wrote, “it is critically important that the US maintains its lead in developing AI with democratic values.”

Meta CEO Mark Zuckerberg called Trump’s election win a “decisive victory” and said he looked forward to forward to working with the Trump administration. “We have great opportunities ahead of us as a country,” Zuckerberg wrote in a post on Threads, Meta’s rival to Elon Musk’s X app. The two men have also had a rocky relationship at times. In 2021, Facebook banned Trump for two years shortly after the Jan. 6 insurrection.

Musk, who also runs electric vehicle maker Tesla, space exploration company SpaceX, and brain tech startup Neuralink, also unsurprisingly cheered Trump’s win.

Musk has been a key ally for Trump in his campaign for the White House, with the former president promising prior to his election to appoint Musk as the head of a government efficiency commission. Musk also contributed nearly $75 million to America PAC, a pro-Trump super political action committee that he established earlier in the year. Tesla shares rallied more than 13% on Wednesday afternoon as investors were optimistic that a Trump win would benefit the vehicle maker.

Sundar Pichai, CEO of Google parent Alphabet, also congratulated Trump on his victory and said he’s committed to working with the president-elect’s administration.

Microsoft CEO Sundar Pichai said: “Congratulations President Trump, we’re looking forward to engaging with you and your administration to drive innovation forward that creates new growth and opportunity for the United States and the world.”

Cisco founder and CEO Chuck Robbins wrote in a post on X that the company looks forward to working with Trump and Congress on policies around “connectivity, innovation, cybersecurity, and more.”

Box CEO Aaron Levie also sent his good wishes to Trump. He wrote in a post on X, “Wild ride. Congrats to @realDonaldTrump on becoming President again. What’s great about America is that we’re on a rocket ship right now and can keep accelerating with the right policies and execution.”

Michael Dell, CEO and chairman of Dell Technologies, added his own congratulations in a post on X.

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Super Micro shares plummet 22% after financial update heightens investor concerns

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November 6, 2024

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Super Micro shares plummet 22% after financial update heightens investor concerns

Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7. 

Annabelle Chih | Bloomberg | Getty Images

Super Micro shares plunged 22% on Wednesday to their lowest level since May of last year after the embattled server maker issued disappointing unaudited financials and failed to provide specifics plans to keep its Nasdaq listing.

The stock dropped to $21.55 as of early afternoon and is now down 82% from its high in March, a selloff that’s wiped out about $57 billion of market cap.

Super Micro had its worst week on the market on record last week after the resignation of its auditor, Ernst & Young, the second accounting firm to bow out in under two years. The company faces accusations from an activist of accounting irregularities and that it’s shipped sensitive chips to sanctioned nations and companies, violating export controls.

Super Micro hasn’t filed audited financials since May and is at risk of being delisted by Nasdaq if it doesn’t report results for the latest fiscal year to the SEC by mid-November. The company said late Tuesday, in reporting preliminary results for the first fiscal quarter, that it doesn’t know when it will file annual financials.

On a call with analysts, the company said it wouldn’t discuss any questions related to Ernst & Young’s decision to resign and didn’t address corporate governance issues. CEO Charles Liang said Super Micro was actively in the process of hiring a new auditor.

Analysts at Mizuho suspended coverage of the stock on Wednesday “due to a lack of full financial detailed and audited statements.” Wedbush analysts, who have the equivalent of a hold rating on the stock, said the report left “more questions than answers.”

“Management seems fully focused on finding an auditor and resolving its late filing status,” the Wedbush analysts wrote. “However, we don’t know how significant the hurdles might be in achieving this goal.”

Liang said on the call that the company is “working with urgency to become current again with our financial reporting.”

For the quarter ending Sept. 30, Super Micro said it generated net sales of between $5.9 billion and $6 billion. That’s under analyst expectations of $6.45 billion, but is still up 181% on an annual basis. The company’s business has been booming of late because it ships servers packed with Nvidia’s processors for artificial intelligence.

NVIDIA founder, President and CEO Jensen Huang speaks about the future of artificial intelligence and its effect on energy consumption and production at the Bipartisan Policy Center in Washington, D.C., on Sept. 27, 2024.

Chip Somodevilla | Getty Images

Super Micro shares soared 246% last year after jumping 87% in 2023. The stock peaked at $118.81 in March, shortly after being added to the S&P 500.

Liang said demand is strong for the latest Nvidia GPU, called Blackwell, which started shipping in recent weeks.

When asked by an analyst when Blackwell revenue might show up in Super Micro’s financials, Liang said that “we are asking Nvidia every day,” adding that the companies continue to work together closely.

“Our capacity is ready, but not enough new chips,” Liang said.

Analysts asked if the company’s plans for building Blackwell-based servers had changed, which could suggest that other server makers might receive additional capacity or allocations of Nvidia GPUs at Super Micro’s expense.

“To clarify one of the comments from earlier with respect to Nvidia, we have the deepest of relationships with Nvidia,” CFO David Weigand said. “Now we have multiple state-of-the art-projects in progress and we’ve spoken to Nvidia and they’ve confirmed they’ve made no changes to allocations. We maintain a strong relationship with them, and don’t expect that to change.”

Super Micro’s forecast for the December quarter was also below estimates. The company said revenue will be between $5.5 billion and $6.1 billion, trailing the $6.86 billion average analyst estimate, according to LSEG. Adjusted earnings per share will be 56 cents to 65 cents. Analysts were looking for EPS of 83 cents.

Super Micro said its board of directors had commissioned a special committee to look into Ernst & Young’s concerns. In a three-month investigation, the committee found there was “no evidence of fraud or misconduct” from management, the company said.

“The Committee is recommending a series of remedial measures for the Company to strengthen its internal governance and oversight functions, and the Committee expects to deliver the full report on the completed work this week or next,” Super Micro said, adding that it intends to take all steps to keep its listing on Nasdaq.

WATCH: Super Micro shares down on earnings

Super Micro shares down on earnings, says investigation finds 'no evidence of fraud or misconduct'

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Nintendo jumps 6% as it says current Switch games will be playable on the console’s successor

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November 6, 2024

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Nintendo jumps 6% as it says current Switch games will be playable on the console's successor

The Nintendo Switch game console store in Shanghai, Feb 25, 2024. 

Cfoto | Future Publishing | Getty Images

Nintendo on Wednesday said it will allow current Switch games to be played on the hit console’s successor as it looks to drum up excitement among its current user base for the highly-anticipated device.

Shares of Nintendo closed 5.8% higher in Tokyo on Wednesday, after the announcement.

“Investors think this is a sign Nintendo’s next device will not be a risky experiment but rather a continuation,” Serkan Toto, CEO of Tokyo-based games consultancy Kantan Games, told CNBC.

“I believe investors want Nintendo to adopt the iPhone approach of gradually improving a winning product instead of trying to reinvent the wheel with every new console generation.”

Backward compatibility of games is critical for console makers for several reasons: firstly, when new consoles launch, they often do not have a huge amount of games to choose from. Making older games available for the new Switch will boost the device’s appeal on this front.

Secondly, current Switch users who are thinking of purchasing new games ahead of the new console launch may hold off until after its debut. Making current games playable on the Switch’s successor removes that concern.

The Switch is Nintendo’s second-best selling console in history, behind the Nintendo DS.

But demand for the Nintendo Switch, which was first released in 2017, is slowly beginning to fade — albeit from high levels. Investors have been waiting for more details about the console’s successor, which the company said it will announce in its fiscal year ending March 2025.

Nintendo managed to breathe new life into the nearly eight-year-old console last year by releasing games involving top brands like Zelda and Pokemon, as well as expanding into areas like movies.

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