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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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Qualcomm pops on chipmaker’s earnings and revenue beat

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November 6, 2024

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Qualcomm pops on chipmaker's earnings and revenue beat

Qualcomm CEO Cristiano Amon speaks at the Computex forum in Taipei, Taiwan, June 3, 2024.

Ann Wang | Reuters

Qualcomm reported fourth-quarter earnings on Wednesday that beat Wall Street expectations for earnings and revenue, and the company guided to a strong December quarter.

The shares rose 10% in extended trading at one point before falling to a gain of about 4%.

Here’s how the company did versus Refinitiv consensus expectations for the quarter ending Sept. 29:

  • Earnings per share: $2.69, adjusted $2.56 expected
  • Revenue: $10.24 billion versus $9.90 billion expected

Qualcomm said it expects revenue in the current quarter of between $10.5 billion and $11.3 billion, with the midpoint of that range beating LSEG consensus expectations of $10.59 billion.

The company reported $2.92 billion in net income, or $2.59 per share, a sharp jump from last year’s $1.49 billion, or $1.23 per share. Qualcomm reported $33.19 billion in total revenue in its fiscal 2024, a 9% increase from 2023.

Qualcomm’s fortunes have historically been tied to the smartphone industry, where the company provides a range of chips to handset makers, including system-on-a-chip processors, modems, and antennas. The company makes the chip at the heart of most high-end Android devices, and many lower-end phones as well. Qualcomm also sells modems and related chips to Apple for its iPhones, and last year said its contract for 5G chips ran through 2026.

Qualcomm reported a 12% increase in handset chip sales to $6.1 billion, in line with FactSet estimates. Qualcomm introduced its high-end chip for 2025, called Snapdragon 8 Elite, in October.

“In handsets we delivered greater than 20% year-over-year growth in Android revenues,” said Qualcomm CFO Akash Palkhiwala on a call with analysts.

Under CEO Cristiano Amon, the company has diversified away from being a smartphone supplier and has introduced and invested heavily in producing chips for PCs, cars, and industrial machines.

“We will continue to transform Qualcomm from a wireless communications company into a connected computing company for the age of AI,” Qualcomm CEO Cristiano Amon said on the earnings call with analysts.

Qualcomm has also made efforts to brand itself as a leader in AI, having developed smartphone chips with specialized parts for machine learning since 2017. But unlike Nvidia, the company doesn’t produce the kind of graphics processors for data centers that are used for big AI programs like OpenAI’s ChatGPT.

The automotive business grew 86% on an annual basis to $899 million in sales. Qualcomm says it has billions of dollars in business with automakers currently in its development pipeline, and highlighted it was the fifth consecutive quarter of growth. Qualcomm said that it expected automotive sales in the current quarter to rise 50% on an annual basis.

The company’s “internet of things” business includes both chips for industrial purposes as well as the chips Meta uses in its Quest handsets and Ray-Ban Smart Glasses. It also includes the new business selling chips for laptops running Microsoft Windows. The division reported $1.68 billion in revenue, a 22% increase from a year earlier.

Qualcomm’s chip business, including its handset, automotive, and other chips, which together is reported as QCT, saw sales rise 18% during the quarter to $7.37 billion in total. 

The company’s profitable technology licensing business, QTL, reported $1.52 billion in revenue, a 21% increase over the same period last year.

Qualcomm said its board had approved $15 billion in additional buybacks. During the fourth quarter, it repurchased $1.3 billion worth of shares and paid out $947 million in dividends.

WATCH: CNBC’s full interview with Qualcomm CEO Cristiano Amon

Watch CNBC's full interview with Qualcomm CEO Cristiano Amon

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Coinbase CEO Brian Armstrong is more than $2 billion richer after post-election stock pop

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November 6, 2024

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Coinbase CEO Brian Armstrong is more than billion richer after post-election stock pop

Brian Armstrong, co-founder and chief executive officer of Coinbase Inc., speaks during the Singapore Fintech Festival, in Singapore, on Friday, Nov. 4, 2022. 

Bryan van der Beek | Bloomberg | Getty Images

Election Day proved hugely successful for the crypto industry. Nobody was a bigger winner than Coinbase CEO Brian Armstrong.

Coinbase shares soared 31% on Wednesday, their best day on record, as investors celebrated the company’s victorious efforts to get pro-crypto candidates into office. Fairshake, the Coinbase-backed PAC, says that of the 58 candidates it supported, 46 won, with the remaining contests 12 still undecided.

Armstrong, who co-founded Coinbase in 2012 and took it public in 2021, remains the crypto exchange’s biggest investor, with ownership of well over 10% of the company’s outstanding shares. As of the latest proxy filing, he owned 34.8 million Class A and Class B shares, a stake that jumped by about $2.1 billion in value on Wednesday to almost $9 billion.

“Being anti-crypto is simply bad politics,” Armstrong wrote in a post on X, after Ohio Republican Bernie Moreno was declared the winner in his state’s Senate race over incumbent Democrat Sherrod Brown.

In a lengthier follow-up post on Wednesday, Armstrong said “no matter how you slice it, this election was huge win for crypto.”

Bitcoin jumped over 9.5%, reaching a record of over $76,400.

A Coinbase spokesperson declined to comment further.

We're in a good position for liquidity cycles for crypto, says Neoclassic Capital's Michael Bucella

Some $40 million of crypto money was directed at defeating Brown, the chairman of the Senate Banking Committee. One PAC paid for five ads designed to boost awareness of Moreno, a blockchain entrepreneur with very little name recognition entering the race.

The Stand With Crypto Alliance, which Coinbase launched last year, gave Brown an “F” grade, while it issued Moreno an “A.”

Moreno flipped the seat, winning 50.3% of votes cast to 46.3% for Moreno, according to NBC News. His win helped ensure a majority for the Republicans in Senate, alongside Republican nominee Donald Trump’s victory in the presidential contest.

“I am so grateful to Ohioans for their resounding support in this race,” Moreno said in a statement Tuesday night. “I look forward to working with the new Republican Senate majority to fix our economy, secure our border, and return to American strength at home and abroad.”

Moreno’s statement made no mention of crypto, despite the fact that the industry bankrolled his campaign.

Politics pays off

For Armstrong, politics has become a big part of the job as his company fights for a friendlier Washington and more amenable regulatory environment.

Securities and Exchange Commission Chair Gary Gensler sued Coinbase last year over claims that it sells unregistered securities. A judge has since ruled that the case should be heard by a jury. Coinbase has fought back vociferously, and has also said that it wants to work with regulators to come up with a proper set of laws governing the nascent industry.

Republican nominee for U.S. Senate Bernie Moreno addresses supporters at Brecksville Community Center on November 4, 2024 in Brecksville, Ohio. 

Stephen Maturen | Getty Images

Armstrong told CNBC in September that his visits to the nation’s capital used to take place once or twice a year. Then it got to be at least a quarterly occasion. And the pace has only increased.

“In the beginning, a lot of people didn’t know what crypto was,” Armstrong said of his earlier trips. Now, “the discussion has advanced, really, to, how do we pass clear rules, create legislation in the United States?”

In the 2024 election cycle, Coinbase was one of the top corporate donors, giving more than $75 million to Fairshake and its affiliate PACs, including a fresh pledge of $25 million to support the pro-crypto super PAC in the 2026 midterms. Armstrong personally contributed more than $1.3 million to a mix of candidates up and down the ballot.

Coinbase stayed out of the presidential contest and focused its finances exclusively on congressional races, in an effort to assemble a group of lawmakers with favorable views of the industry.

Coinbase’s big post-election pop more than makes up for the 15% drop in the stock last week after the company reported disappointing quarterly results due to lower transaction revenue and a drop in subscriptions services revenue.

Paul Grewal, Coinbase’s chief legal officer, attended multiple fundraisers for Trump in the months before the election. As the results were rolling in Tuesday, Grewal said in a post on X that he hopes the SEC “understands what has happened tonight.”

“Stop suing crypto,” Grewal wrote. “Start talking to crypto. Initiate rulemaking now. There’s no reason to wait.”

Armstrong reposted the Grewal’s comments, adding one word of his own: “True.”

WATCH: Next congress will be ‘most pro-crypto congress’ ever

Next congress will be 'most pro-crypto congress' ever, says Coinbase CEO Brian Armstrong

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

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9 hours ago

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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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