Amazon sellers suspended over stolen goods caught in crime ring

Of the many acts that can get an Amazon merchant kicked off the site, few are as devastating as selling stolen goods. Amazon calls the behavior “illegal and strictly prohibited,” and those accused of such activity can be permanently suspended.

Dozens of small businesses have been booted from Amazon in recent months for purportedly hawking stolen goods from home appliance brands such as Breville, Keurig, Levoit and SharkNinja. But suspended sellers, who spent years building their businesses on Amazon, told CNBC they had no idea they were selling stolen products.

Amazon has provided limited evidence to back up its claims, sellers said, leaving them scrambling to find the problematic merchandise. To try to get reinstated and save their million-dollar business from potential collapse, they’ve taken it upon themselves to discover if they unsuspectingly bought stolen goods from one of the many wholesalers, closeout businesses and distributors that supply their Amazon inventory.

Amazon’s marketplace of independent sellers accounts for over 60% of goods sold on the platform. It’s such a dominant force in e-commerce that it’s often the primary or even sole source of revenue for third-party sellers. Over the past decade, the rapid growth of the marketplace has fueled a parallel boom in counterfeiters and spammers trying to game the system, pushing Amazon to ramp up enforcement. 

Retailers, lawmakers and trade groups have repeatedly called attention to the growth of organized retail crime, saying that online marketplaces have contributed to the problem. Amazon’s recent crackdown serves as acknowledgment by the company that criminals are attempting to use the site as an outlet for illicitly obtained products.

While sellers can get suspended for any number of behaviors, from promoting unsafe or expired goods to providing bad customer experience and using inaccurate product descriptions, no allegation is harder to overcome than being labeled a seller of stolen items. Those merchants say Amazon has little interest in offering them second chances or much of an opportunity to defend themselves. 

CNBC spoke with six sellers who were recently suspended. Each provided us with the names of their suppliers. A review of their invoices, communications with suppliers and other documentation revealed a convoluted web of wholesale and liquidation companies that frequently overlapped, and advertised similar products, including espresso machines from Breville, Keurig coffee makers, Levoit humidifiers, LG computer monitors, Shark mops and vacuums, and Ninja appliances.

In an email to CNBC, Amazon said it’s working with authorities and doesn’t comment “on matters that are the subject of active law enforcement investigations.”

“Amazon does not allow independent sellers to list stolen goods in our store, and we work closely with law enforcement, retailers, and brands to stop bad actors and hold them accountable, including withholding funds, terminating accounts, and making law enforcement referrals,” the company said.

Two years ago, an Amazon seller — we’ll call him Frank — shifted from selling home goods under his own brand to running a wholesale business. With so much competition in the marketplace, he viewed it as safer to sell products consumers know and trust rather than promoting an unfamiliar brand.

On March 14, his thriving three-year-old Amazon business came to a screeching halt. Frank, who asked that we not use his real name out of fear of retribution from Amazon and his suppliers, said that’s the day Amazon told him his account had been suspended for selling stolen goods. 

Frank said Amazon didn’t tell him which of his legions of products were allegedly stolen or offer any details that could help him track down the offenders. If he wanted any shot of appealing the suspension and saving his company, Frank would have to figure it all out himself.

Amazon wouldn’t comment on Frank’s case or any other specific sellers, but the company said in a statement that it regularly requests “invoices, purchase orders, or other proofs of sourcing” if it has concerns about a seller, and has an appeals process for merchants who believe enforcement decisions were erroneous.

One of Frank’s suppliers, according to documents he provided to CNBC, was KZ International, a large wholesale and distribution company owned by Kenzo Sobrie, a successful entrepreneur who has been described as “the youngest Amazon millionaire.”  

When Frank contacted Amazon about his suspension, an account health representative told him that KZ had been placed on an internal list of “risky suppliers.” Amazon declined to say if such a list exists.

In December, KZ’s warehouse in Huntington Beach, California, was raided by the California Highway Patrol, which seized pallets of Dyson vacuums, TP-Link routers, Ninja blenders and Breville espresso machines. A few weeks later, law enforcement carried out a similar raid at the warehouse of one of KZ’s clients. 

KZ sued two of it suppliers in March, claiming they provided the business with stolen goods. CHP ultimately recovered nearly $4 million worth of goods that it determined was “stolen cargo,” according to KZ’s complaint. Separately, Amazon said it shared information and intelligence with CHP in support of the investigation dubbed “Operation Overloaded.”

Frank still isn’t certain if his suspension was tied to products from KZ. His store has been offline for almost four months. Four other merchants suffered a similar fate right around the same time, according to information provided to CNBC. They all said they’d never been notified of selling stolen goods in their years on Amazon, and had no idea which of their products had been flagged or the suppliers who could be responsible. 

Millions of sellers from across the globe now make up Amazon’s third-party marketplace. Some go the private label route, selling household goods, clothing or exercise equipment under an independent brand. Others prefer to act as retailers, reselling hundreds or thousands of different products from well-known brands.

Either way, it’s a cutthroat, low-margin business that typically involves paying hefty fees to Amazon for warehousing and shipping products as well as for customer support and advertising. None of that shields a seller from getting duped by a wholesaler that may be providing them with stolen or counterfeit products, and being suddenly shut down. 

While Amazon offers a free program called account health assurance, which is intended to protect merchants from getting summarily suspended, Amazon’s seller central site says accounts can be deactivated immediately “if we believe you have engaged in fraudulent, deceptive, illegal, or otherwise harmful activity.”

Amazon uses technology to track products from the moment it enters a fulfillment center, scanning for fraud and counterfeits. When it identifies potential problems, the company refers products to investigators and refers cases to law enforcement. For organized retail crime, the company has an internal group called the ORC Engagement Team, consisting of law enforcement professionals.

Amazon’s aggressive recent actions coincide with calls from lawmakers and government agencies to root out stolen goods on the site after a rise in organized shoplifting, which allegedly led to more stolen items on e-commerce platforms. New legislation requires online marketplaces to verify the identity of high-volume sellers in order to prevent fraud. 

Suspensions on Amazon are notoriously difficult to overcome. Sellers told CNBC that they’ve been given the chance to appeal their suspension in a judgment day-style video interview with an Amazon representative, where they can make their case for reinstatement. But it’s a longshot. 

The interview typically lasts about 45 minutes, and sellers are required to provide copies of their driver’s license, tax ID number, invoices, and bank statements, among other documents. Amazon is supposed to notify sellers whether they cleared the interview within five business days. But some merchants say they’re still waiting for an answer weeks after their interview date.

“You start from a guilty-until-proven-innocent standpoint, and then if you can prove that it’s a mistake, it’s possible to get reinstated,” said Chris McCabe, a former Amazon employee who has spent the past nine years helping suspended sellers get back up and running. “These people can’t produce proof, because the items are stolen or the suppliers won’t cooperate and give them proof.” 

Amazon sellers are supposed to vet suppliers before they work with them. However, unraveling where the goods came from can be challenging, as it’s common for resold items to be bought and sold by several parties before being purchased by a merchant and listed on Amazon. 

Beyond providing Amazon with receipts and documentation, the sellers say there’s little they can do to resolve the situation. In the meantime, their accounts remain locked, forcing some to lay off their employees or even file for bankruptcy. 

“It’s been devastating to us, truthfully,” said Ricky Sala, who co-owns Oregon Prep Center, which launches and operates Amazon businesses for other companies. “We’re terrified to buy any wholesale products for customers right now because we don’t know what’s stolen, what’s not stolen, or what Amazon is going to say is stolen, even if it’s not stolen.”

Several of the accounts Sala oversees were suspended in recent months, which has cost his business some clients.

One of the main ways suspended sellers from across the country have gotten to know each other and swap stories is through chat groups. They found each other through forums, social media and mutual connections. In June, while sharing details of their suspensions with one another, several of them discovered that they had purchased goods from the same suppliers.

The Los Angeles area, home to two of the busiest trade ports in the country, has emerged as a hotbed for apparent organized retail criminal activity, based on the information provided by suspended sellers.

Several sellers told CNBC that the process of sourcing inventory changed during the Covid pandemic. Because of travel restrictions, they were unable to to meet prospective suppliers at trade shows or at their warehouses, so they would connect over social networks such as Instagram and Facebook, where they resorted to getting virtual tours of inventory. 

Suppliers would nudge sellers to subscribe to their Telegram channel, where they advertise which products they have in stock, and how much they cost. The channels have names like “Amazon wholesales,” “Bulk sales” and “Amazon deals.”

Sala, 28, said a lot of the suppliers he knows who use Telegram’s messaging service are in his age bracket, and prefer blasting notes to their large groups rather than sending mass emails.

“They want to communicate fully on their phone,” Sala said. 

Sellers are encouraged to act fast as the groups can have thousands of members and the offers typically get snapped up quickly. 

A CNBC review of more than a half-dozen such Telegram groups showed consumer electronics and small kitchen appliances were some of the most popular products. Sellers told CNBC they would often order hundreds of thousands of dollars worth of products through these groups.

Even though travel reopened as the pandemic eased, much of the process remained virtual. Sellers who wanted to visit a supplier’s warehouse to check out inventory might find themselves unable to get hot products because competitors would snatch them up. They couldn’t afford to wait.

To manage costs, sellers rarely touch the merchandise. Instead, they rely on distributors to ship products into Amazon’s warehouses, where the e-retailer handles the sorting, packing and preparing of items for delivery through a popular program known as Fulfillment by Amazon, or FBA.  

A seller in Miami said in an interview that in the back half of last year, he began working with a handful of new suppliers he’d found on Instagram, hoping to expand into the popular home appliances category. 

The merchant, who asked to remain anonymous, paid over half a million dollars for pallets of air fryers, food processors, and espresso machines, according to invoices and bank statements reviewed by CNBC.  

The documents showed that several of the suppliers claimed to have purchased the items directly from brands or liquidators. The Miami merchant said the suppliers offered the goods at “regular wholesale” prices.

On March 17, Amazon suspended his account for allegedly selling stolen items. In correspondence between the seller and Amazon, the company refused to say which products were in violation. 

He contacted the FBI, hoping law enforcement might be able to help. Officials opened a report, but said there was little they could do without knowing which products were stolen. 

One New York-based merchant said that on May 6, Amazon froze $17,000 worth of “unsuitable inventory,” which an account rep told him signified it was stolen goods. Amazon sent over a list of dozens of products that had violated its policies.

“We have taken this measure because we believe that your account is offering items that are unsuitable and may have been used to engage in deceptive or illegal activity that harms our customers, other selling partners, and our store,” according to a copy of the notice, which was viewed by CNBC. 

The seller tracked down the products and provided as many invoices as he could to Amazon as part of his appeal interview on June 1. He was never suspended, but the inventory remains frozen more than a month later.

Several sellers said they reached out to the attorney general’s office in Amazon’s home state of Washington to raise awareness about what was happening. The attorney general’s office contacted the company in June about the suspensions, sources told CNBC.

Amazon confirmed that it’s in contact with the Washington State Office of the Attorney General on the topic of organized retail crime but didn’t provide details. The attorney general’s office didn’t respond to CNBC’s requests for comment.

In tracing the supply chain for suspended sellers, some patterns started to emerge. 

At least three sellers purchased computer monitors, air fryers and other goods from Ngo Wholesale Distributors, also known as Ngo Trading Co., which has addresses in Santa Fe Springs, part of Los Angeles County, and Garden Grove, just south in Orange County.  

Tien Ngo, the company’s owner, told CNBC in an interview that he has purchased products from other southern California suppliers, including a company named Stride Trading, which is based outside of Los Angeles.

“They said they weren’t stolen goods, but I never looked into their supply chain,” Ngo said, regarding his conversations with the suppliers. “I didn’t want to jeopardize the existing relationship.” 

Stride was listed as a supplier for other suspended sellers who spoke to CNBC. Because Amazon doesn’t provide details on the suppliers, CNBC couldn’t determine if its name has come up repeatedly by coincidence. Stride didn’t respond to multiple requests for comment.

One seller said he was told by a Ngo employee that the suspensions were due to the recent CHP crackdown. The employee sent the seller a link to a news report about CHP’s “Operation Overloaded,” in which officers in May arrested more than 40 suspects, and recovered roughly $50 million in stolen merchandise, as well as 20 stolen cargo trailers, multiple firearms and 13 gold bars. 

“Chances are stolen goods or similar ASINs/serial numbers are being bled in to every supply line,” the employee wrote. ASINs refers to the 10-digit code used to look up products on Amazon’s website. 

Complaints filed by KZ, the wholesaler and distributor in Huntington Beach, provide the clearest picture of what happened in the lead-up to the suspensions. 

In late March, KZ sued TV Wholesale Outlet, owned by Los Angeles resident Armen Babayan, alleging it sold the company $3.8 million worth of “illicitly obtained” goods. KZ said it learned the goods were stolen following raids by CHP of its facility. Now KZ is not only unable to sell the products but is also incurring “over $376,000 in shipping and storage fees, removal fees, and reserved inventory charges,” it said.

Additionally, KZ said it “has since become the subject of numerous claims by third-parties whose storefronts have been closed or frozen by Amazon because of the ‘stolen cargo.'” 

Babayan filed a motion to dismiss the complaint on June 14 and disputed KZ’s claims. 

KZ filed a separate lawsuit in May alleging another L.A.-area supplier, Juniper Holdings, sold the company over half a million dollars worth of stolen goods. A portion of those goods was seized by CHP when it raided KZ’s warehouse, the complaint said.  

KZ learned some products were stolen months before the raid, according to the complaint, after a client received a letter from TP-Link warning that routers it had sourced from KZ had been stolen. Juniper told KZ it couldn’t return the merchandise, the complaint said.

Babayan didn’t respond to a request for comment. Juniper CEO Cameron Webb denied the allegations in KZ’s lawsuit.

CNBC reached out to Sobrie, the owner of KZ, numerous times by phone and text at numbers we found for him in California, Florida and New Jersey. He didn’t respond.

The owner of the Huntington Beach property that was raided by law enforcement declined to provide a comment but acknowledged that raids had occurred and said Sobrie’s company was no longer a tenant.

Kevin Cole, Sobrie’s attorney, didn’t provide answers to questions about his client’s business activities or relationship to Amazon, writing in an email that “the allegations in our lawsuits speak for themselves.”

Sobrie is well known in Amazon reseller circles. He’s been profiled for his success selling wholesale goods on the site and can be seen in Instagram posts posing in luxury vehicles and sharing e-commerce business advice. 

Sobrie now runs a new wholesale company in New Jersey, KN Trading LLC, according to business records filed in the state. Its Telegram channel, which has over 1,100 subscribers, buzzes with new deals almost daily. A recent video posted on its Instagram page shows a warehouse stacked with boxes of goods, and employees loading packages onto UPS trucks. The caption reads, “Ready to boost your Amazon business? KN Trading is the partner you need!”

Meanwhile, the suspended sellers remain desperate for answers as they burn through cash. They’re almost certain to miss out on Prime Day, Amazon’s annual deal event, scheduled for next week, and can only hope they can get up and running in time to prepare for the holidays, the time of year when many retailers finally turn a profit. 

In the group chat, they check in with each other almost daily, swapping tips for their appeal interviews, looking for any way to increase their chances of getting their accounts back. 

One of them wrote in a recent message, “I’m praying we all get great news very soon and this will be a story that ended well.”

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