Wayfair lodges lawsuit against three suppliers over fraud schemes

Global online furniture retailer Wayfair is suing three of its suppliers following alleged fraud allegations.

Wayfair has filed a lawsuit against Rosevera Corp., Mulhouse Furniture and Fully Wind Co., as well as the former Rosevera CEO and Fully Wind vice president Ping Hua Hsu and Mulhouse employee Tzu Ju Huang.

Supporting the filing, Wayfair said that this is “more than a simple breach-of-contract action”, with the case also about an alleged “sophisticated fraudulent scheme” where “defendants concocted and effectuated to defraud Wayfair”.

Detailed in documents submitted to the court, Wayfair alleges that one scheme involved the production of false shipping labels by “incorrectly entering all but the customer’s ZIP code”, which were then placed on “empty packages so that Wayfair’s carrier still proceeded to deliver the empty package to the location (whether that location was real or fake)”.

The company said it did not suspect anything as once the package was in transit, the tracking information “appeared legitimate” in the system. Once the customer learned that their item was missing, they would launch a “lost in transit claim” against the company.

“Wayfair then requested defendants to send a replacement unit to the customer, and defendants consequently received a second (and sometimes third) payment for a single unit.”

In a second scheme, Wayfair alleges that it has been defrauded as the defendants used Wayfair purchase orders to “generate shipping labels for their sales through to other retailers”, which means Wayfair’s carrier accounts were charged for the associated shipping costs.

The company added that other documents were “fabricated”, including “fake photographs” of broken furniture, to “fraudulently dispute buyer’s remorse returns credits on their payment account”.

Wayfair said that the schemes has seen the company overpay by at least $1.5m. The lawsuit is to retrieve these funds back as well as compensatory damages.

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