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- Imitation Nation Podcast No 38 Counterfeit News VIDEO
In this episode, we explore the latest developments in counterfeit pill presses, vinyl records, and counterfeit products, highlighting law enforcement efforts, legislative updates, and the importance of industry collaboration.
Transcript:
00:00:00:03 - 00:00:23:03
Speaker 1So in South Carolina, this guy walks into a Dollar General with counterfeit bills like bleached tens that they printed 50s on, and he tries to give them to the cashier to load them on to like an app for like a card. And the cashier looks at them, realizes they're fake, and says, I cannot accept these. And so guess what?00:00:23:05 - 00:00:25:07
Speaker 1Guess what? The guy says to the cashier.00:00:25:08 - 00:00:26:22
Speaker 2I don't know.00:00:27:00 - 00:00:30:14
Speaker 1Can I have those back?00:00:30:16 - 00:00:43:19
Speaker 1And the Dollar General cashier, who's probably seen everything because they're a Dollar General cashier, is like, no. And the guy goes to his car and and he's driving to Audie. One of the other employees walks out and takes a picture of the car and the license plate as he.00:00:43:19 - 00:00:50:14
Speaker 2Drives away. Yeah, it's not always the brightest bulbs that that do this. That's funny.00:00:50:15 - 00:00:58:11
UnknownThe Imitation Nation podcast covers all things counterfeit, hosted by Shabbir Amber Schaffner of the partnership for Safe Medicines and Sven Bergmann of Venture Global.00:00:58:16 - 00:01:06:15
Speaker 1All right, Sven, welcome back to Imitation Nation number 38. And one of my favorite topics is the first story. Guess what that is?00:01:06:17 - 00:01:13:05
Speaker 2Well, it's normally counterfeit money, but I don't think that's our first story. So peel presses.00:01:13:07 - 00:01:14:14
Speaker 1Is all Bill presents.00:01:14:18 - 00:01:15:20
Speaker 2So I thought.00:01:15:22 - 00:01:46:10
Speaker 1So often when you see someone who a law enforcement agency that has raided and playing this in drug lab, there's often a pill press in that drug lab, right? And sometimes it's made by a company called Elephant Machines. And LFA machines is one of the biggest, well, most well-known makers of pill presses in the world. And three of their longtime employees and executives just got indicted for six counts.00:01:46:12 - 00:02:07:07
Speaker 1Wow. As well as the company itself. They haven't been tried yet. They've just been indicted and I think arrested. So all of this, all of these accusations by the Department of Justice are alleged. But basically they said that they were knowingly selling pill presses to people that they knew were going to make counterfeit, controlled substance pills.00:02:07:08 - 00:02:10:16
Speaker 2Wow. That is incredible.00:02:10:18 - 00:02:32:18
Speaker 1This investigation has been going since 2019, and it was led by DEA Tucson in Arizona, which is also where the current administrator of the DEA, Shari Oz, was. She was a special agent in charge in Arizona of one of the officers. So that is. Yeah, good friend of ours. Good, good friend of of protecting Americans from fake pills.00:02:32:18 - 00:02:50:18
Speaker 1She has seen everything. Yeah. So they were due in court last week on the 23rd. I don't remember what I was doing that day, but I was not paying attention to it. And the DOJ has been very clear that they have recovered their machines from clandestine drug labs all over the world.00:02:50:23 - 00:03:16:06
Speaker 2Wow. And okay, that's you don't have any speechless often, but because you and I have talked about pill presses a lot. Right. And so normally it's the like, oh, yeah, those are some makers in China. And, you know, they're hard to get. That's the first like executives, which I believe are U.S. executives. So what exactly is the government alleging they did that led to this indictment and arrest?00:03:16:07 - 00:03:38:15
Speaker 1So there's not a lot of detail in the complaint. But if you look at it, they talk about that LFA had a do not sell to list and that somehow they can even though they discussed people that should not be sold to, they still sold the machines. They also site. And I'm not sure that this is as on on his easy legal ground.00:03:38:15 - 00:04:01:11
Speaker 1But they talk about how the firm a press powder that they sell, which is what you use. You mix in your active ingredient with the powder. And the powder, when it's in, a machine binds together and holds together to make a pill. They talk about how it comes in these colors that just mysteriously and perfectly mimic the counterfeit controlled substances and criminals like to make.00:04:01:12 - 00:04:28:21
Speaker 1And we don't know a lot of the details, but the agent who who signed the complaint said that he saw multiple covert, controlled purchases of tablet machines and powder being sold to people that the defendants had talked about or placed on the do not sell to list. So there's clearly more story there, and LFA has not had a chance to respond obviously to this, which they're going to want to do, and they have the right to.00:04:28:21 - 00:04:31:21
Speaker 1But that's that's what they accused him of.00:04:31:23 - 00:04:52:22
Speaker 2Okay. That that's that's that's really bad. You know, we often talk about that people should do a good know your customer. And that's step one. When you then do know your customer and you put people on a those are not good people do not sell to and then you still sell to them. You're creating your own evidence against yourself.00:04:52:22 - 00:05:08:12
Speaker 2So what's really interesting apparently with this, this evidence, the government also what I read has filed a post indictment restraining order. Never heard of that before. What is that? So it turns out.00:05:08:14 - 00:05:34:17
Speaker 1That the LFA is owned by a larger conglomerate of companies that are all in this space, and apparently the parent company is having some cash flow issues. They own a lot of other companies like LFA. LFA is just the biggest one, but the government has asserted that they are struggling financially and that they have defaulted on some loans in the range of millions of dollars.00:05:34:17 - 00:05:50:07
Speaker 1And I think the government is worried that will sell the assets of LFA, and there will be nothing left to pay the the penalties, forfeiture and restitution that the government thinks they're going to get out of this, out of this case.00:05:50:09 - 00:06:07:04
Speaker 2That is that is interesting. Yeah. And, you know, it'll be God, I can't wait to see all the court documents and where it goes. But Deb might have been part of it, where if you're in financial straits and you're like, I need to make money. These people are technically do not sell this. But, you know, money is always green.00:06:07:04 - 00:06:17:02
Speaker 2And obviously the powder seller's blue. But okay, so what's your what's your what's your take on the case and who do we who do we think for this. Like who was involved.00:06:17:04 - 00:06:34:15
Speaker 1So and I just want to say again that this is just an indictment. And I think there were arrests. But LFA has not had a chance to respond. And they may have a very different take on this, but I don't think that the government would have assembled seven years of evidence and then brought an indictment unless they thought it was pretty solid.00:06:34:16 - 00:07:03:06
Speaker 1That's that's not how the feds operate. They like to go in with overwhelming proof of what they have to say. I can't believe that we won't. I don't have any exact proof that that DEA administrator Oz Shari Oz worked on this, but this is the kind of passionate work that I think she would have done. The DOJ specifically cited Homeland Security Task Force in the state called HSF Arizona, which is not an acronym I heard.00:07:03:07 - 00:07:22:20
Speaker 1But they did also thank the High Intensity Drug Trafficking Area group hideout, which is which is something we're familiar with. And all this comes out of DEA Tucson. So if you are listening and you're an agent and DEA Tucson and you worked on this case, we're not ever going to name you, but we're going to thank you. So so we'll give you our thank you.00:07:22:20 - 00:07:44:02
Speaker 1And then the list of agencies that contribute to this is insane. It's the IRS, the ATF, Customs and Border Protection, the FBI, sheriffs and local police. Hilariously, of course, not surprisingly, the Postal Service inspectors. You never want to get on the wrong side of leave it or not, the Bureau of Land Management, which I wasn't expecting to see.00:07:44:02 - 00:08:00:20
Speaker 1And of course, finally, the Secret Service and that one I haven't figured out for sure the Secret Service currency and presidential protection. There must be something else here. I'm not aware of that they that they cover, but the Secret Service apparently was thanked as one of the entities.00:08:00:22 - 00:08:24:22
Speaker 2Wow. No, that's that's that's fantastic. That was a huge task force. To your point, seven years in the in the making. I think, you know, whenever I talk to folks that that one faster enforcement and go like, oh, you know can can't the government or cops basically just work faster and for folks to really understand. No, it takes a really long time to build a good case, especially a case like this.00:08:24:22 - 00:08:51:07
Speaker 2When you go after a US company, you go after top executives. You got to be sure you build in a way, and for them to build it with all the parts in their postal service, making sure we're seeing our shift. IRS obviously money movements put the locals in. Yeah, Secret Service would be interesting, I wonder I wonder what that's about, but kind of pull everybody in, make sure everybody is there with all the all working together, everybody pulling, pulling their authority together.00:08:51:07 - 00:08:59:18
Speaker 2So I'm sure we have a trove of documents. Right? We have them on our website or where do we have to and what can people where can people see those documents.00:08:59:20 - 00:09:09:13
Speaker 1So we'll they'll be in the show notes, the press release, the indictment, the restraining order and the affidavit from the agent involved will all be linked in our show notes.00:09:09:19 - 00:09:20:06
Speaker 2Very good. Well, and the last thing is, I know from my team, I was told this is not the only big thing that happened in process. There's something else that is happening on process right now, right?00:09:20:07 - 00:09:46:00
Speaker 1Yes. And indeed it is your team. Your team is monitoring congressional legislation on pill presses and told me that the the Stop Pills That Kill Act, which are 8005, passed the house. It requires all pill presses and many of the parts to carry serial numbers and creates a new crime of removing those numbers. PSM my my organization that you and I both work for endorsed it.00:09:46:00 - 00:10:00:23
Speaker 1And you know, I'm hoping to see what we can do to see if we can get it passed through the Senate. It is a little late in the year. Basically, at this point it's going to have to get passed in lame duck, or it's going to have to wait for the next Congress to take to take their seats.00:10:00:23 - 00:10:10:05
Speaker 1But this is more progress than I think we've seen than in the pill press legislation, than at any other time in the history that I've been watching it for seven years.00:10:10:06 - 00:10:30:07
Speaker 2Yeah, 100%. And the nice thing about this bill is it has bipartisan support. It was it was broadly passed through through the House. A separate version, very similar, was previously passed through the Senate. I'm sure they'll find a way to reconcile it to make sure that it passes. So lame duck will be will be a nice nice clean up to to hopefully for them to to get to it.00:10:30:07 - 00:10:32:23
Speaker 2So good news on pill presses I like it.00:10:33:04 - 00:10:42:00
Speaker 1And my kudos to your federal affairs team staff. They they they know I love them, but I love that they watch they watch stuff like this.00:10:42:02 - 00:10:49:13
Speaker 2Yeah, there's there's a lot to watch. All right.00:10:49:15 - 00:10:52:17
Speaker 1So tell me about what's what's happening in LA.00:10:52:19 - 00:11:20:17
Speaker 2So I got a really interesting story. It's a it's a massive seizure that happened in California. Let me set it up a little bit. So the Los Angeles County Sheriff's Department worked together with the Department of Homeland Security and Homeland Security Investigations, many other partners, federal and local, and they announced the seizure of nearly 26,000 counterfeit products with an estimated retail value of $10 million from a warehouse.00:11:20:17 - 00:11:21:03
Speaker 1And a lot.00:11:21:03 - 00:11:40:15
Speaker 2Of shoes. That's that's a lot of items from a warehouse in Arcadia, California. And the products, as you said, included counterfeit Nike's Adidas Fear of God essentials, which I don't know what their brand is, but it sounds like a really cool apparel brand and other luxury streetwear and footwear. So a massive seizure.00:11:40:17 - 00:11:48:15
Speaker 1So what is different about this raid? I don't want to. I don't want to minimize it. I think these things probably happen all the time. But why did this one catch your eye?00:11:48:17 - 00:12:15:06
Speaker 2It caught my eye. Not because it was just a raid. It did two things for me a the sheer size, like $10 million in a single raid in a warehouse in the United States, again, this big. But when you look into the case and it's how investigators got there, right? So it started out when CBP started to intercept some shipments that were destined for California Port of entries, and when they started to seize them, they started to.00:12:15:07 - 00:12:41:15
Speaker 2Now it comes back down to really good investigative work. They looked at all the shipping documents and they said, What is common here? And they started to notice that it's the same consignor. It's the same warehouse in Arcadia. These keep going to and they said, let's start tracking these. And instead of just, you know, seizing one pair of of shoes, they started to build the case and started to track the shipments, develop probable cause.00:12:41:16 - 00:12:47:03
Speaker 2And then, when it was big enough, obtained a search warrant and executed the raid.00:12:47:05 - 00:12:55:12
Speaker 1So they really this wasn't a warehouse raid. This they basically dismantled a counterfeiting import and distribution operation.00:12:55:12 - 00:13:15:12
Speaker 2That's exactly it. And again, this comes down to like when folks sometimes say, oh, you know, just see stuff at the border. And that's the end of an investigation. No, most of the time that's just the beginning. Right. As you and I know, every shipment has paperwork, every shipment has a destination, and every shipment has people that, you know, wait for it on the one side and people that shipped it.00:13:15:15 - 00:13:46:10
Speaker 2The more and more that can be put together as a case, the more and more you can get info to identify what it is. Which, by the way, quick plug here for the bill on information sharing, which is also in Congress. And hopefully you make it in the in the lame duck session. And that's exactly it. When you have all of these documents, investigators then can use those data points to identify importers, warehouses, distributors and hopefully ideally the criminal organization behind it really building the case, right.00:13:46:12 - 00:13:47:03
Speaker 2Yeah.00:13:47:04 - 00:13:51:01
Speaker 1So I'm assuming that this wasn't just LA County sheriff. This was.00:13:51:02 - 00:14:12:20
Speaker 2It was it was not just well, it was LA County sheriff, but LA County sheriff's has not a big surprise since since LA, but has a dedicated unit, which is the LA County Sheriff's Department Counterfeit and piracy enforcement team. Plus they work together. Yeah, of course it's Los Angeles. They have to. And they're also worked together with Homeland Security Investigations and Customs.00:14:12:20 - 00:14:27:21
Speaker 2And so a nice big a task force and then a specialized unit that Los Angeles County has for counterfeit and piracy, which given that there's a lot of fashion and a lot of movie industry in Los Angeles, a very natural development.00:14:27:23 - 00:14:35:23
Speaker 1I don't know of another operation like that. Like what? What is how active is this L.A. County sheriff? Anti-Counterfeiting.00:14:36:01 - 00:14:58:19
Speaker 2So they're very active. And to your point, there is not a lot, actually. Phoenix what we just talked about, Phoenix says something similar is called the best team. They do something very similar. Larger metros sometimes have specialized teams. But this team in Los Angeles is is particularly active. They have served over the last year, roughly 25 search warrants and recovered roughly 200,000 counterfeit products.00:14:58:19 - 00:15:10:00
Speaker 2So they are very active. It's not isolated and they're clearly doing a really good, good job in in building nice large cases that really can be brought to to justice.00:15:10:02 - 00:15:15:11
Speaker 1All right. So if you're a brand owner, what is the takeaway here from this operation.00:15:15:14 - 00:15:37:12
Speaker 2It it reinforces a lot of the things we often talk about. Right. Don't just focus on the seizure. Focus on really providing and working with investigators to build really good investigations as seizures. Just the first interception, the paperwork, study and logistics are needed, helping to identify warehouses and ultimately work their way to the people that are running this.00:15:37:12 - 00:16:01:06
Speaker 2And so again, I want to quickly put a plug here. Our good friend Travis Johnson, who we have had on a previous part, is, together with many others, working very diligently to pass a bill in Congress that actually would make sure that customs can share exactly all the info we just described about the shipping manifests, the shipping documents, the labels, etc. with brand owners.00:16:01:06 - 00:16:22:14
Speaker 2So de, together with law enforcement can build that case. And that bill also has been passed through through the House. It is sitting on the floor of the Senate again with precious time in the Senate. I know lots of fingers and toes crossed. It would be tremendous to do because as both of our first stories show, it's so hard to build a really, really good case.00:16:22:14 - 00:16:33:09
Speaker 2And the more we can share info between law enforcement, private industry that really makes sure we can get to the big players behind the seizure. That for me is really the big the big takeaway.00:16:33:11 - 00:16:48:17
Speaker 1Awesome. All right. Well, Travis, we are with you in spirit. And also I endorsed your bill, so I am with you. I am with you. My signatures on your dotted line. That's right.00:16:48:19 - 00:17:01:15
Speaker 1All right. So I want to talk about the resurgence of vinyl records, which have had a real, I think, ever since Pearl jam did that album they released as vinyl.00:17:01:15 - 00:17:33:15
Speaker 1We've seen a huge explosion in people listening to vinyl, buying vinyl, and, not surprisingly, counterfeit vinyls, of course. So in Britain, there was just a really good article in The Guardian about a gentleman who ran a vinyl record counterfeiting operation. It's been running for nine years, they said, since 2017. Wow. He just pleaded guilty to two charges of breach of copyright and acquiring and using criminal property, which is not in charge.00:17:33:15 - 00:17:59:09
Speaker 1I think this is familiar to me in the States. He was guilty, Gilchrist. He pled guilty on both counts, and he got two years and eight months. Okay. And then I think three and a half years for the second charge. So he's going to serve those concurrently. He's going to be in jail for three and a half years for counterfeit vinyl records, which I suppose if you're a collector, you probably think is probably pretty good because you cut off, I guess.00:17:59:10 - 00:18:02:03
Speaker 1So this wasn't a by the way.00:18:02:06 - 00:18:09:08
Speaker 2Was not. So what did you bootleg? How many, how many, how many LPs has he done? And like which artist like what has he done?00:18:09:12 - 00:18:31:12
Speaker 1So when they raided his warehouse and he, he was selling out of his warehouse on eBay and Discogs, if you're if you have a friend who's a vinyl nerd, they've probably talked to you about always looking for new records on Discogs, which is a big vinyl trading marketplace and sale marketplace. When they raided this warehouse, they raided, they picked up 15,000 records.00:18:31:12 - 00:18:32:16
Speaker 2Wow.00:18:32:18 - 00:18:36:11
Speaker 1Yeah, it is not small.00:18:36:13 - 00:18:44:03
Speaker 2So was he was he just faking like. Because last time we talked about, like, how did it do it? Do you just buy and then put fake labels on. How did he. How did he do it.00:18:44:06 - 00:19:05:08
Speaker 1So he pretty much did everything I think except print the labels. He was he was pirating first new release records. Right. It's one thing, I suppose. Probably still not legal. There's one thing to, like, find a bootleg recording of. I'm just going to use a Grateful Dead as an example Grateful Dead show, and then turn it into a vinyl record that you release.00:19:05:09 - 00:19:27:11
Speaker 1He was pirating first run brand new releases by like, Taylor Swift and other major artists. And it was something where like the, the, the folks say they were very surprised by the whole thing because he wasn't he didn't use like a mastering a piece of equipment. So I don't know how he was making it, but he was not doing it in the traditional way that they were expecting.00:19:27:11 - 00:19:30:09
Speaker 1But he made a lot, quite, quite a lot.00:19:30:12 - 00:19:51:13
Speaker 2And and you're right, as we talked before. Right. My kids are also, you know, they're they're 17. 19. They're huge into vinyl. And so it's actually funny when you say this. And then when you brought me the story and I looked at it and I looked at the pictures of the seizure, and I saw some of the broken vinyl records that were there that didn't work well in production.00:19:51:13 - 00:20:11:11
Speaker 2And when I saw these, like he's doing, as you say, he's doing the first runs and he's doing like special collection kind of pieces. So like, for example, Taylor Swift, my kids, they have a lot of her special vinyls that are like pink or red or certain special colors. And so he then fakes the color and all of that and makes these like special runs.00:20:11:11 - 00:20:37:17
Speaker 2And it's it's tremendous for the story. So to look at how big it's gotten. And in 2025, according to the data I saw, there's about $1 billion worth of vinyl that's being sold like, that's huge, $1 billion in vinyls being sold. And, you know, as you said, for this guy, he didn't just do the label, he got the actual vinyl pressing machine.00:20:37:18 - 00:20:59:06
Speaker 2Don't know to your point how he copied the master, how good the quality was. And it's and it's and it's tremendous. And the other thing that that this let us down, I looked at how often this has happened in the UK alone. They have executed 43 search warrants against fake vinyl and CD bugler operations, with a street value of about 8 million pounds.00:20:59:06 - 00:21:04:10
Speaker 2It's about 10 million USD. So it's big business.00:21:04:12 - 00:21:23:09
Speaker 1Yeah, he he was so prolific that apparently after the raid, the the the British Phonographic Industry, which is an incredibly great retro name. Yeah. For what's probably the vinyl trade association over there, the rights, the rights organization, they had to contract 100 contact 108 different artists.00:21:23:10 - 00:21:24:14
Speaker 2Wow.00:21:24:16 - 00:21:35:13
Speaker 1To sort of confirm that he wasn't authorized, you know, to to to press records for them. So he was he was not he would he did not have a niche. He was doing everything.00:21:35:15 - 00:21:53:19
Speaker 2And he wasn't messing. He wasn't a messing about, you know, it's what an operation. It reminds me kind of of the what does it catch me, if you can, with, with Leonardo DiCaprio when he has that big printing machine for the fake checks and all that, you know, go big or go home like, he sure went big so well.00:21:53:19 - 00:22:06:12
Speaker 1So the BPI said that there are ten other active counterfeiting operations that they're monitoring in the UK right now. So this is probably not the last of these incidences we're going to see.00:22:06:14 - 00:22:12:01
Speaker 2I can't wait to see the next nine.00:22:12:03 - 00:22:29:21
Speaker 1So I don't have a whole big story on fake money, which you know, along with stamps is one of my favorite topics and pill presses. But I will say that there's a lot of little incidences all over the news, all over the country, in the US this week about people passing fake money in casinos, which I don't know.00:22:29:23 - 00:22:42:08
Speaker 1Let me just let me give you some free advice on your crime. Don't pass fake money at a casino. They look at bills all day. It's not going to make it unless you have a super fake you're done.00:22:42:10 - 00:22:51:21
Speaker 2Or to or to a judge or obviously or bill or the third one we can add to story you're about to cover. Don't do that either.00:22:51:23 - 00:23:14:02
Speaker 1So in New York, in North Manheim Township, some dude was went to a Dollar General to load a chime card, which I guess is a cash value card with money with six fake 20s and two real fives. And and they kept that. So it's, it's it's happening all over. You know, we'll bring you a full story when we get like a really big story about it.00:23:14:02 - 00:23:23:15
Speaker 1But, you know, continue as a normal person or as a small business owner to be wary of fake currency, because there's a lot of people out there trying to pass it on to you.00:23:23:17 - 00:23:34:17
Speaker 2Very good, very, very good advice. If if you know, don't don't give counterfeit money to judges, bail money. And when somebody discovers his fake money, don't ask back for it. Got it.00:23:34:18 - 00:23:38:14
Speaker 1They're not going to give it back to you if they're doing their job. All right. Thank you. Sven,00:23:38:19 - 00:23:42:21
Speaker 2All right. Fantastic. Nice talking to you and Shabbir. Read us out.00:23:42:23 - 00:23:48:05
UnknownThe Imitation Nation podcast is a production of Cost Stories and is the sole owner of this production.00:23:48:05 - 00:23:51:03
UnknownAll statements are of their own and not the opinions of their employers.00:23:51:07 - 00:23:56:01
UnknownPodcast management by Sarah Imber Safdar after theme music written by Jonathan Boyle.24 min - Imitation Nation Podcast No 38 Counterfeit News AUDIO
In this episode, we explore the latest developments in counterfeit pill presses, vinyl records, and counterfeit products, highlighting law enforcement efforts, legislative updates, and the importance of industry collaboration.
In this episode, we explore the latest developments in counterfeit pill presses, vinyl records, and counterfeit products, highlighting law enforcement efforts, legislative updates, and the importance of industry collaboration.
Transcript:
00:00:00:03 - 00:00:23:03
Speaker 1So in South Carolina, this guy walks into a Dollar General with counterfeit bills like bleached tens that they printed 50s on, and he tries to give them to the cashier to load them on to like an app for like a card. And the cashier looks at them, realizes they're fake, and says, I cannot accept these. And so guess what?00:00:23:05 - 00:00:25:07
Speaker 1Guess what? The guy says to the cashier.00:00:25:08 - 00:00:26:22
Speaker 2I don't know.00:00:27:00 - 00:00:30:14
Speaker 1Can I have those back?00:00:30:16 - 00:00:43:19
Speaker 1And the Dollar General cashier, who's probably seen everything because they're a Dollar General cashier, is like, no. And the guy goes to his car and and he's driving to Audie. One of the other employees walks out and takes a picture of the car and the license plate as he.00:00:43:19 - 00:00:50:14
Speaker 2Drives away. Yeah, it's not always the brightest bulbs that that do this. That's funny.00:00:50:15 - 00:00:58:11
UnknownThe Imitation Nation podcast covers all things counterfeit, hosted by Shabbir Amber Schaffner of the partnership for Safe Medicines and Sven Bergmann of Venture Global.00:00:58:16 - 00:01:06:15
Speaker 1All right, Sven, welcome back to Imitation Nation number 38. And one of my favorite topics is the first story. Guess what that is?00:01:06:17 - 00:01:13:05
Speaker 2Well, it's normally counterfeit money, but I don't think that's our first story. So peel presses.00:01:13:07 - 00:01:14:14
Speaker 1Is all Bill presents.00:01:14:18 - 00:01:15:20
Speaker 2So I thought.00:01:15:22 - 00:01:46:10
Speaker 1So often when you see someone who a law enforcement agency that has raided and playing this in drug lab, there's often a pill press in that drug lab, right? And sometimes it's made by a company called Elephant Machines. And LFA machines is one of the biggest, well, most well-known makers of pill presses in the world. And three of their longtime employees and executives just got indicted for six counts.00:01:46:12 - 00:02:07:07
Speaker 1Wow. As well as the company itself. They haven't been tried yet. They've just been indicted and I think arrested. So all of this, all of these accusations by the Department of Justice are alleged. But basically they said that they were knowingly selling pill presses to people that they knew were going to make counterfeit, controlled substance pills.00:02:07:08 - 00:02:10:16
Speaker 2Wow. That is incredible.00:02:10:18 - 00:02:32:18
Speaker 1This investigation has been going since 2019, and it was led by DEA Tucson in Arizona, which is also where the current administrator of the DEA, Shari Oz, was. She was a special agent in charge in Arizona of one of the officers. So that is. Yeah, good friend of ours. Good, good friend of of protecting Americans from fake pills.00:02:32:18 - 00:02:50:18
Speaker 1She has seen everything. Yeah. So they were due in court last week on the 23rd. I don't remember what I was doing that day, but I was not paying attention to it. And the DOJ has been very clear that they have recovered their machines from clandestine drug labs all over the world.00:02:50:23 - 00:03:16:06
Speaker 2Wow. And okay, that's you don't have any speechless often, but because you and I have talked about pill presses a lot. Right. And so normally it's the like, oh, yeah, those are some makers in China. And, you know, they're hard to get. That's the first like executives, which I believe are U.S. executives. So what exactly is the government alleging they did that led to this indictment and arrest?00:03:16:07 - 00:03:38:15
Speaker 1So there's not a lot of detail in the complaint. But if you look at it, they talk about that LFA had a do not sell to list and that somehow they can even though they discussed people that should not be sold to, they still sold the machines. They also site. And I'm not sure that this is as on on his easy legal ground.00:03:38:15 - 00:04:01:11
Speaker 1But they talk about how the firm a press powder that they sell, which is what you use. You mix in your active ingredient with the powder. And the powder, when it's in, a machine binds together and holds together to make a pill. They talk about how it comes in these colors that just mysteriously and perfectly mimic the counterfeit controlled substances and criminals like to make.00:04:01:12 - 00:04:28:21
Speaker 1And we don't know a lot of the details, but the agent who who signed the complaint said that he saw multiple covert, controlled purchases of tablet machines and powder being sold to people that the defendants had talked about or placed on the do not sell to list. So there's clearly more story there, and LFA has not had a chance to respond obviously to this, which they're going to want to do, and they have the right to.00:04:28:21 - 00:04:31:21
Speaker 1But that's that's what they accused him of.00:04:31:23 - 00:04:52:22
Speaker 2Okay. That that's that's that's really bad. You know, we often talk about that people should do a good know your customer. And that's step one. When you then do know your customer and you put people on a those are not good people do not sell to and then you still sell to them. You're creating your own evidence against yourself.00:04:52:22 - 00:05:08:12
Speaker 2So what's really interesting apparently with this, this evidence, the government also what I read has filed a post indictment restraining order. Never heard of that before. What is that? So it turns out.00:05:08:14 - 00:05:34:17
Speaker 1That the LFA is owned by a larger conglomerate of companies that are all in this space, and apparently the parent company is having some cash flow issues. They own a lot of other companies like LFA. LFA is just the biggest one, but the government has asserted that they are struggling financially and that they have defaulted on some loans in the range of millions of dollars.00:05:34:17 - 00:05:50:07
Speaker 1And I think the government is worried that will sell the assets of LFA, and there will be nothing left to pay the the penalties, forfeiture and restitution that the government thinks they're going to get out of this, out of this case.00:05:50:09 - 00:06:07:04
Speaker 2That is that is interesting. Yeah. And, you know, it'll be God, I can't wait to see all the court documents and where it goes. But Deb might have been part of it, where if you're in financial straits and you're like, I need to make money. These people are technically do not sell this. But, you know, money is always green.00:06:07:04 - 00:06:17:02
Speaker 2And obviously the powder seller's blue. But okay, so what's your what's your what's your take on the case and who do we who do we think for this. Like who was involved.00:06:17:04 - 00:06:34:15
Speaker 1So and I just want to say again that this is just an indictment. And I think there were arrests. But LFA has not had a chance to respond. And they may have a very different take on this, but I don't think that the government would have assembled seven years of evidence and then brought an indictment unless they thought it was pretty solid.00:06:34:16 - 00:07:03:06
Speaker 1That's that's not how the feds operate. They like to go in with overwhelming proof of what they have to say. I can't believe that we won't. I don't have any exact proof that that DEA administrator Oz Shari Oz worked on this, but this is the kind of passionate work that I think she would have done. The DOJ specifically cited Homeland Security Task Force in the state called HSF Arizona, which is not an acronym I heard.00:07:03:07 - 00:07:22:20
Speaker 1But they did also thank the High Intensity Drug Trafficking Area group hideout, which is which is something we're familiar with. And all this comes out of DEA Tucson. So if you are listening and you're an agent and DEA Tucson and you worked on this case, we're not ever going to name you, but we're going to thank you. So so we'll give you our thank you.00:07:22:20 - 00:07:44:02
Speaker 1And then the list of agencies that contribute to this is insane. It's the IRS, the ATF, Customs and Border Protection, the FBI, sheriffs and local police. Hilariously, of course, not surprisingly, the Postal Service inspectors. You never want to get on the wrong side of leave it or not, the Bureau of Land Management, which I wasn't expecting to see.00:07:44:02 - 00:08:00:20
Speaker 1And of course, finally, the Secret Service and that one I haven't figured out for sure the Secret Service currency and presidential protection. There must be something else here. I'm not aware of that they that they cover, but the Secret Service apparently was thanked as one of the entities.00:08:00:22 - 00:08:24:22
Speaker 2Wow. No, that's that's that's fantastic. That was a huge task force. To your point, seven years in the in the making. I think, you know, whenever I talk to folks that that one faster enforcement and go like, oh, you know can can't the government or cops basically just work faster and for folks to really understand. No, it takes a really long time to build a good case, especially a case like this.00:08:24:22 - 00:08:51:07
Speaker 2When you go after a US company, you go after top executives. You got to be sure you build in a way, and for them to build it with all the parts in their postal service, making sure we're seeing our shift. IRS obviously money movements put the locals in. Yeah, Secret Service would be interesting, I wonder I wonder what that's about, but kind of pull everybody in, make sure everybody is there with all the all working together, everybody pulling, pulling their authority together.00:08:51:07 - 00:08:59:18
Speaker 2So I'm sure we have a trove of documents. Right? We have them on our website or where do we have to and what can people where can people see those documents.00:08:59:20 - 00:09:09:13
Speaker 1So we'll they'll be in the show notes, the press release, the indictment, the restraining order and the affidavit from the agent involved will all be linked in our show notes.00:09:09:19 - 00:09:20:06
Speaker 2Very good. Well, and the last thing is, I know from my team, I was told this is not the only big thing that happened in process. There's something else that is happening on process right now, right?00:09:20:07 - 00:09:46:00
Speaker 1Yes. And indeed it is your team. Your team is monitoring congressional legislation on pill presses and told me that the the Stop Pills That Kill Act, which are 8005, passed the house. It requires all pill presses and many of the parts to carry serial numbers and creates a new crime of removing those numbers. PSM my my organization that you and I both work for endorsed it.00:09:46:00 - 00:10:00:23
Speaker 1And you know, I'm hoping to see what we can do to see if we can get it passed through the Senate. It is a little late in the year. Basically, at this point it's going to have to get passed in lame duck, or it's going to have to wait for the next Congress to take to take their seats.00:10:00:23 - 00:10:10:05
Speaker 1But this is more progress than I think we've seen than in the pill press legislation, than at any other time in the history that I've been watching it for seven years.00:10:10:06 - 00:10:30:07
Speaker 2Yeah, 100%. And the nice thing about this bill is it has bipartisan support. It was it was broadly passed through through the House. A separate version, very similar, was previously passed through the Senate. I'm sure they'll find a way to reconcile it to make sure that it passes. So lame duck will be will be a nice nice clean up to to hopefully for them to to get to it.00:10:30:07 - 00:10:32:23
Speaker 2So good news on pill presses I like it.00:10:33:04 - 00:10:42:00
Speaker 1And my kudos to your federal affairs team staff. They they they know I love them, but I love that they watch they watch stuff like this.00:10:42:02 - 00:10:49:13
Speaker 2Yeah, there's there's a lot to watch. All right.00:10:49:15 - 00:10:52:17
Speaker 1So tell me about what's what's happening in LA.00:10:52:19 - 00:11:20:17
Speaker 2So I got a really interesting story. It's a it's a massive seizure that happened in California. Let me set it up a little bit. So the Los Angeles County Sheriff's Department worked together with the Department of Homeland Security and Homeland Security Investigations, many other partners, federal and local, and they announced the seizure of nearly 26,000 counterfeit products with an estimated retail value of $10 million from a warehouse.00:11:20:17 - 00:11:21:03
Speaker 1And a lot.00:11:21:03 - 00:11:40:15
Speaker 2Of shoes. That's that's a lot of items from a warehouse in Arcadia, California. And the products, as you said, included counterfeit Nike's Adidas Fear of God essentials, which I don't know what their brand is, but it sounds like a really cool apparel brand and other luxury streetwear and footwear. So a massive seizure.00:11:40:17 - 00:11:48:15
Speaker 1So what is different about this raid? I don't want to. I don't want to minimize it. I think these things probably happen all the time. But why did this one catch your eye?00:11:48:17 - 00:12:15:06
Speaker 2It caught my eye. Not because it was just a raid. It did two things for me a the sheer size, like $10 million in a single raid in a warehouse in the United States, again, this big. But when you look into the case and it's how investigators got there, right? So it started out when CBP started to intercept some shipments that were destined for California Port of entries, and when they started to seize them, they started to.00:12:15:07 - 00:12:41:15
Speaker 2Now it comes back down to really good investigative work. They looked at all the shipping documents and they said, What is common here? And they started to notice that it's the same consignor. It's the same warehouse in Arcadia. These keep going to and they said, let's start tracking these. And instead of just, you know, seizing one pair of of shoes, they started to build the case and started to track the shipments, develop probable cause.00:12:41:16 - 00:12:47:03
Speaker 2And then, when it was big enough, obtained a search warrant and executed the raid.00:12:47:05 - 00:12:55:12
Speaker 1So they really this wasn't a warehouse raid. This they basically dismantled a counterfeiting import and distribution operation.00:12:55:12 - 00:13:15:12
Speaker 2That's exactly it. And again, this comes down to like when folks sometimes say, oh, you know, just see stuff at the border. And that's the end of an investigation. No, most of the time that's just the beginning. Right. As you and I know, every shipment has paperwork, every shipment has a destination, and every shipment has people that, you know, wait for it on the one side and people that shipped it.00:13:15:15 - 00:13:46:10
Speaker 2The more and more that can be put together as a case, the more and more you can get info to identify what it is. Which, by the way, quick plug here for the bill on information sharing, which is also in Congress. And hopefully you make it in the in the lame duck session. And that's exactly it. When you have all of these documents, investigators then can use those data points to identify importers, warehouses, distributors and hopefully ideally the criminal organization behind it really building the case, right.00:13:46:12 - 00:13:47:03
Speaker 2Yeah.00:13:47:04 - 00:13:51:01
Speaker 1So I'm assuming that this wasn't just LA County sheriff. This was.00:13:51:02 - 00:14:12:20
Speaker 2It was it was not just well, it was LA County sheriff, but LA County sheriff's has not a big surprise since since LA, but has a dedicated unit, which is the LA County Sheriff's Department Counterfeit and piracy enforcement team. Plus they work together. Yeah, of course it's Los Angeles. They have to. And they're also worked together with Homeland Security Investigations and Customs.00:14:12:20 - 00:14:27:21
Speaker 2And so a nice big a task force and then a specialized unit that Los Angeles County has for counterfeit and piracy, which given that there's a lot of fashion and a lot of movie industry in Los Angeles, a very natural development.00:14:27:23 - 00:14:35:23
Speaker 1I don't know of another operation like that. Like what? What is how active is this L.A. County sheriff? Anti-Counterfeiting.00:14:36:01 - 00:14:58:19
Speaker 2So they're very active. And to your point, there is not a lot, actually. Phoenix what we just talked about, Phoenix says something similar is called the best team. They do something very similar. Larger metros sometimes have specialized teams. But this team in Los Angeles is is particularly active. They have served over the last year, roughly 25 search warrants and recovered roughly 200,000 counterfeit products.00:14:58:19 - 00:15:10:00
Speaker 2So they are very active. It's not isolated and they're clearly doing a really good, good job in in building nice large cases that really can be brought to to justice.00:15:10:02 - 00:15:15:11
Speaker 1All right. So if you're a brand owner, what is the takeaway here from this operation.00:15:15:14 - 00:15:37:12
Speaker 2It it reinforces a lot of the things we often talk about. Right. Don't just focus on the seizure. Focus on really providing and working with investigators to build really good investigations as seizures. Just the first interception, the paperwork, study and logistics are needed, helping to identify warehouses and ultimately work their way to the people that are running this.00:15:37:12 - 00:16:01:06
Speaker 2And so again, I want to quickly put a plug here. Our good friend Travis Johnson, who we have had on a previous part, is, together with many others, working very diligently to pass a bill in Congress that actually would make sure that customs can share exactly all the info we just described about the shipping manifests, the shipping documents, the labels, etc. with brand owners.00:16:01:06 - 00:16:22:14
Speaker 2So de, together with law enforcement can build that case. And that bill also has been passed through through the House. It is sitting on the floor of the Senate again with precious time in the Senate. I know lots of fingers and toes crossed. It would be tremendous to do because as both of our first stories show, it's so hard to build a really, really good case.00:16:22:14 - 00:16:33:09
Speaker 2And the more we can share info between law enforcement, private industry that really makes sure we can get to the big players behind the seizure. That for me is really the big the big takeaway.00:16:33:11 - 00:16:48:17
Speaker 1Awesome. All right. Well, Travis, we are with you in spirit. And also I endorsed your bill, so I am with you. I am with you. My signatures on your dotted line. That's right.00:16:48:19 - 00:17:01:15
Speaker 1All right. So I want to talk about the resurgence of vinyl records, which have had a real, I think, ever since Pearl jam did that album they released as vinyl.00:17:01:15 - 00:17:33:15
Speaker 1We've seen a huge explosion in people listening to vinyl, buying vinyl, and, not surprisingly, counterfeit vinyls, of course. So in Britain, there was just a really good article in The Guardian about a gentleman who ran a vinyl record counterfeiting operation. It's been running for nine years, they said, since 2017. Wow. He just pleaded guilty to two charges of breach of copyright and acquiring and using criminal property, which is not in charge.00:17:33:15 - 00:17:59:09
Speaker 1I think this is familiar to me in the States. He was guilty, Gilchrist. He pled guilty on both counts, and he got two years and eight months. Okay. And then I think three and a half years for the second charge. So he's going to serve those concurrently. He's going to be in jail for three and a half years for counterfeit vinyl records, which I suppose if you're a collector, you probably think is probably pretty good because you cut off, I guess.00:17:59:10 - 00:18:02:03
Speaker 1So this wasn't a by the way.00:18:02:06 - 00:18:09:08
Speaker 2Was not. So what did you bootleg? How many, how many, how many LPs has he done? And like which artist like what has he done?00:18:09:12 - 00:18:31:12
Speaker 1So when they raided his warehouse and he, he was selling out of his warehouse on eBay and Discogs, if you're if you have a friend who's a vinyl nerd, they've probably talked to you about always looking for new records on Discogs, which is a big vinyl trading marketplace and sale marketplace. When they raided this warehouse, they raided, they picked up 15,000 records.00:18:31:12 - 00:18:32:16
Speaker 2Wow.00:18:32:18 - 00:18:36:11
Speaker 1Yeah, it is not small.00:18:36:13 - 00:18:44:03
Speaker 2So was he was he just faking like. Because last time we talked about, like, how did it do it? Do you just buy and then put fake labels on. How did he. How did he do it.00:18:44:06 - 00:19:05:08
Speaker 1So he pretty much did everything I think except print the labels. He was he was pirating first new release records. Right. It's one thing, I suppose. Probably still not legal. There's one thing to, like, find a bootleg recording of. I'm just going to use a Grateful Dead as an example Grateful Dead show, and then turn it into a vinyl record that you release.00:19:05:09 - 00:19:27:11
Speaker 1He was pirating first run brand new releases by like, Taylor Swift and other major artists. And it was something where like the, the, the folks say they were very surprised by the whole thing because he wasn't he didn't use like a mastering a piece of equipment. So I don't know how he was making it, but he was not doing it in the traditional way that they were expecting.00:19:27:11 - 00:19:30:09
Speaker 1But he made a lot, quite, quite a lot.00:19:30:12 - 00:19:51:13
Speaker 2And and you're right, as we talked before. Right. My kids are also, you know, they're they're 17. 19. They're huge into vinyl. And so it's actually funny when you say this. And then when you brought me the story and I looked at it and I looked at the pictures of the seizure, and I saw some of the broken vinyl records that were there that didn't work well in production.00:19:51:13 - 00:20:11:11
Speaker 2And when I saw these, like he's doing, as you say, he's doing the first runs and he's doing like special collection kind of pieces. So like, for example, Taylor Swift, my kids, they have a lot of her special vinyls that are like pink or red or certain special colors. And so he then fakes the color and all of that and makes these like special runs.00:20:11:11 - 00:20:37:17
Speaker 2And it's it's tremendous for the story. So to look at how big it's gotten. And in 2025, according to the data I saw, there's about $1 billion worth of vinyl that's being sold like, that's huge, $1 billion in vinyls being sold. And, you know, as you said, for this guy, he didn't just do the label, he got the actual vinyl pressing machine.00:20:37:18 - 00:20:59:06
Speaker 2Don't know to your point how he copied the master, how good the quality was. And it's and it's and it's tremendous. And the other thing that that this let us down, I looked at how often this has happened in the UK alone. They have executed 43 search warrants against fake vinyl and CD bugler operations, with a street value of about 8 million pounds.00:20:59:06 - 00:21:04:10
Speaker 2It's about 10 million USD. So it's big business.00:21:04:12 - 00:21:23:09
Speaker 1Yeah, he he was so prolific that apparently after the raid, the the the British Phonographic Industry, which is an incredibly great retro name. Yeah. For what's probably the vinyl trade association over there, the rights, the rights organization, they had to contract 100 contact 108 different artists.00:21:23:10 - 00:21:24:14
Speaker 2Wow.00:21:24:16 - 00:21:35:13
Speaker 1To sort of confirm that he wasn't authorized, you know, to to to press records for them. So he was he was not he would he did not have a niche. He was doing everything.00:21:35:15 - 00:21:53:19
Speaker 2And he wasn't messing. He wasn't a messing about, you know, it's what an operation. It reminds me kind of of the what does it catch me, if you can, with, with Leonardo DiCaprio when he has that big printing machine for the fake checks and all that, you know, go big or go home like, he sure went big so well.00:21:53:19 - 00:22:06:12
Speaker 1So the BPI said that there are ten other active counterfeiting operations that they're monitoring in the UK right now. So this is probably not the last of these incidences we're going to see.00:22:06:14 - 00:22:12:01
Speaker 2I can't wait to see the next nine.00:22:12:03 - 00:22:29:21
Speaker 1So I don't have a whole big story on fake money, which you know, along with stamps is one of my favorite topics and pill presses. But I will say that there's a lot of little incidences all over the news, all over the country, in the US this week about people passing fake money in casinos, which I don't know.00:22:29:23 - 00:22:42:08
Speaker 1Let me just let me give you some free advice on your crime. Don't pass fake money at a casino. They look at bills all day. It's not going to make it unless you have a super fake you're done.00:22:42:10 - 00:22:51:21
Speaker 2Or to or to a judge or obviously or bill or the third one we can add to story you're about to cover. Don't do that either.00:22:51:23 - 00:23:14:02
Speaker 1So in New York, in North Manheim Township, some dude was went to a Dollar General to load a chime card, which I guess is a cash value card with money with six fake 20s and two real fives. And and they kept that. So it's, it's it's happening all over. You know, we'll bring you a full story when we get like a really big story about it.00:23:14:02 - 00:23:23:15
Speaker 1But, you know, continue as a normal person or as a small business owner to be wary of fake currency, because there's a lot of people out there trying to pass it on to you.00:23:23:17 - 00:23:34:17
Speaker 2Very good, very, very good advice. If if you know, don't don't give counterfeit money to judges, bail money. And when somebody discovers his fake money, don't ask back for it. Got it.00:23:34:18 - 00:23:38:14
Speaker 1They're not going to give it back to you if they're doing their job. All right. Thank you. Sven,00:23:38:19 - 00:23:42:21
Speaker 2All right. Fantastic. Nice talking to you and Shabbir. Read us out.00:23:42:23 - 00:23:48:05
UnknownThe Imitation Nation podcast is a production of Cost Stories and is the sole owner of this production.00:23:48:05 - 00:23:51:03
UnknownAll statements are of their own and not the opinions of their employers.00:23:51:07 - 00:23:56:01
UnknownPodcast management by Sarah Imber Safdar after theme music written by Jonathan Boyle.24 min - Imitation Nation Podcast No 37 Counterfeit News Video
In this episode, Shabbir and Sven explore the complexities of counterfeit products, focusing on airbags and luxury watches. They discuss the challenges faced by online marketplaces in verifying authenticity and the broader implications for safety and brand integrity.
Transcript:
shabbir (00:01)
Sven welcome to episode number thirty seven, a prime number I'd point out of Imitation Nation.Sven (00:08)
Okay. That that took me a second to think, but yes, that is a prime number. happy Friday. How are you?shabbir (00:13)
I'm good. I usually try andSven (00:14)
Okay.shabbir (00:15)
pretend that I take Fridays off. I clearly never take Fridays off. But I am dressed down as if I am taking Friday off. In the sweatshirt of my daughter's high school, which is for all of us of a certain age, it's a fame high school, like from the TV shows. So she spends halfSven (00:31)
Nice.shabbir (00:32)
her day playing cello.Sven (00:33)
That's lovely. That actually was an excellent movie, side note. So today today is today is the 80s movie day. I reminded Stacy, one of our team members, today on some good 80s movie she should watch with everything developing in AI, I recommended she watch War Games. I don't know if you remember that movie with Matthew Broderick. Justshabbir (00:52)
Yes.Sven (00:53)
stuff just becoming really real. And I'm like, you might want to watch that because that's it's very, very relevant right now. Soshabbir (00:59)
The onlyshabbir (01:00)
winning move is not to play.Sven (01:02)
There you go, good quote,shabbir (01:03)
Ha ha ha.Sven (01:04)
like it. Well good to see you, sir.shabbir (01:08)
Good to see you and good to see us both in our home. I think we just recorded an episode recently from you in a hotel room in Colorado, which was a very scenic warm lamp you had, just like the one you have in your office.Sven (01:19)
That was lovely, yeah. No, and and this is one of the few where I'm not travelling. Starting next week it's gonna be it's gonna be a wild three months of travel.shabbir (01:29)
Yeah. ISven (01:30)
So you will see meSven (01:31)
in lots of unusual spots during our recordings, I think.shabbir (01:35)
I I am going to be traveling to visit with pa a patient victim next week and try and get her story on camera. And remains to be seen if I will be traveling internationally for more peptide victims, but we're finding them all over the world. People I'll just say this, we're not gonna do a whole story on this, but don't be taking those unapproved by the FDA peptides. That is not safe.Sven (01:58)
no.Sven (01:59)
No, and as as you and I talked about, because you you told me about this, I started researching it, and so I started researching it on my social media platforms. And because these algorithms now think that I like this or I'm looking for that, my entire social media feed is now full of this. And it is scary what's out there. So yeah, don't don't don't take any of this unapproved stuff. It's crazy.shabbir (02:24)
So I want to start talking about airbags becauseSven (02:29)
Okay.shabbir (02:30)
we have talked a lot about airbags, we talked about the big jury settlement, the big award, wrongfulSven (02:37)
Mm-hmm.shabbir (02:38)
death suit. In that case, the airbag was sold on eBay. And eBay responded this week by banning the sale of airbags on its platform. Not surprisingly.Sven (02:51)
I'm I'm sure it's completeSven (02:52)
completely uncorrelated. I'm sure it's completely uncorrelated.shabbir (02:57)
So this takes effect September twenty-fourth. eBay will probi prohibit the sale of all airbags and airbag inflators after a series of fatalities. I think we have nine or ten deaths in the US that have been traced to counterfeit airbags and the six hundred and three million dollar wrongful death verdict. The one young woman with children who don't have a mother anymore. the lawsuit did name eBay. I don't know if that was the deciding factor, but eBay has notshabbir (03:25)
eBay is not what I would call a poor actor all the time. I mean everybody has in the brand protection world has issues with eBay, but they it's you cannot call them non-responsive. but in this case they have chosen to to respond by banning the sale of of of airbags on its platform. And I I think you've looked at the other platforms that are that that have policies on airbags, Sven. What have you found?Sven (03:50)
no, and and I think, you know, well, so first of all, glad that eBay is doing this. Like it's one of those moves that's just it's very overdue. was the lawsuit a contributing factor? I would just say yes. I'm sure that they looked at it and say, hey, listen, this while they got dismissed from the lawsuit because of section 230 protection, a six hundred three million dollar verdict. You're like, you look at this and you're like, listen, that's not worth it. and but more importantly.Sven (04:17)
Is pretty much every other large platform: Amazon, Facebook Marketplace, Alibaba, AliExpress, all of them, and several other marketplaces already have adopted over the years the policy to not sell airbags because they're like, we can't verify them, right? We can't match them to a VIN and all of that, and people falsify them. And so they many of those most marketplaces already prohibited it. So for me, eBay is kind of.Sven (04:45)
catching up with that, which is great. I wouldn't be surprised if eBay as well as other marketplaces also start to ban all kinds of other automotive OEM parts like brake pads and all of that, because I can't verify it. And I've seen brake pads that are counterfeit that are made literally out of sawdust. and when you hit that on the highway, right? That's just gonna evaporate. So fromshabbir (05:07)
Yeah.Sven (05:07)
a pure liability perspectiveSven (05:09)
These platforms hopefully will get more cautious with with things that's really safety critical.shabbir (05:15)
Here's what I don't get.shabbir (05:19)
With all the resources that eBay has and all the cooperation that they could possibly get from manufacturers, what this basically says when you say we're banning the sale of airbags on our platform and airbag inflators is that we cannot tell you if someone lists it if it's real. Right? That is a huge infrastructure problem. AndSven (05:41)
Mm-hmm.shabbir (05:42)
for a marketplace, even with the cooperation of the manufacturer, to not be able to say that we cannot.shabbir (05:48)
demonstrate that this is real? Like they they could they could have taken the step that the only person allowed to sell airbags is a is an a manufacturer. Right? They could have taken that step, but they decided that that was even contained risk that they didn't want. What does it say when when even the largest marketplace, one of the largest marketplaces in the world with resources to do brand protection, throws up their hands and says, we can't do it. It's notshabbir (06:17)
It's not possible to tell youSven (06:18)
Yeah.shabbir (06:19)
if the airbag for sale is real or not. That's crazy.Sven (06:23)
And and I I I for that one I don't even blame eBay for it. I think, you know, you and I, because we deal a lot in the pharmaceutical world, which is a a wonderful world because it's a it's a closed distribution system. The US system is a closed distribution system, and it's only licensed parties are allowed to trade with each other. everybody should know that you're licensed, you ask for licenses. often they're licensed federal, state, municipality through.Sven (06:51)
That's a nice closed system. I know who's playing in it. For most other products, especially car OEMs, that doesn't exist. Almost anybody can buy automotive parts, especially secondary marketplace. So, like things that are replacement parts for repairs. There are wholesalers, there are sub jobbers, then there are repair places. So they never established a licensed marketplace. So it starts out with the I don't know who is allowed to sell.Sven (07:20)
And then what they're also missing, for example, in the pharmaceutical world, you have it. You have a you have a track and trace system with a serial number I can track. And in cars, you don't always have that. Now with airbags, they tried to solve it by linking the airbag to the VIN. but if it's a replacement one, I don't have a VIN to link it to. So they just didn't serialize. So it they don't have the basic fundamentals in place to either authenticate the seller.Sven (07:47)
or authenticate the product. And yeah, it's a it's a massive, it's a massive issue. In the oem market, it's a massive issue. It's generally the issue a lot of counterfeiters are dealing with that they don't have close distribution chains And that makes it really, really hard to combat counterfeit. So yeah, a hundred percent.shabbir (08:05)
That's really the takeaway. You cannot layer a secure online marketplace on an unlicensed, chaotic, lacking authorization physical supply chain. And that's what airbags are, right? It's not the maker Takata of the airbag listing on eBay. It's some reseller. And they apparently don't have a closed distribution chain for those resellers to be able to s tell eBay.shabbir (08:30)
And these are the only eleven companies allowed to sell.Sven (08:33)
That's exactly it. That's exactly it. And Takata might have they might have because I assume Takata's from overseas. So Takata probably has a distribution partner overseas, then they have several importers here. Those importers then ship to distributor partners here, those sell to sub jobbers, so you are you're three levels in and I have no chance to authenticate that. None.shabbir (08:55)
Yeah, and no licensing. Yeah. It's it's crazy. I'm I'm I'm glad to see eBay do it. I'm sorry they're the last ones. I actually like to think of them as being more more proactive than that, but it's a shame. But they did it and we should give them props for doing it. And it's becoming impossible to imagine that any airbag you buy online is not unsafe. Something I say about medicine every day.Sven (09:21)
Agreed.Sven (09:25)
All right, I have a second story. And the second story actually ties nicely into that. it's another industry where there is no certified seller-reseller network. There is no licensing scheme. There are not track and trace mechanisms in place. and when you have those conditions in place and you put a lot of valuable items into it, counterfeiters go like, that's a that's a fun one to exploit. And so it ties back to the fake watch and Rolex w story we wereSven (09:53)
covering a couple of weeks ago. You remember that we were talking about some major major seizures that were coming out of Louisville and and Indianapolis. just to refresh folks, that was where those two C B P ports have had seized a total of a hundred twenty five million of fake watches over the last couple of months and we just talked about that. So now now there's a new indictment that just came out where federal prosecutors in Connecticut charged a Brooklyn woman.Sven (10:21)
and she's accused of trafficking counterfeit Rolex, audemars piguet Panera watches in from China. And according to the indictment, CBP intercepted 74 separate parcels that she had shipped that were tied to the organization she works with, with a combined retail value of more than 16 million dollars, just that one individual in her group. and investigators seized roughly $900,000 in cash. So aSven (10:47)
big case that is connected to all of these seizures that C V P is doing increasingly.shabbir (10:53)
I I'm a successful adult white collar professional, but I'm not successful enough that there's nine hundred thousand dollars of cash lying around my house.Sven (11:02)
Normally not,Sven (11:03)
no. No. You know, and and what was really interesting about that case is the timeline. So the the DOJ or the the USA laid it out fantastically. The investigation and this entire Rolex scheme ready started in twenty twenty. So that's six years ago. Six years agoshabbir (11:23)
Yeah.Sven (11:23)
they started. They started to seize several items, they started to investigate.Sven (11:28)
Then in twenty twenty four they they arrested several members of that organization and they keep looking, keep digging before now this final defendant was now charged in twenty twenty six. So besides part of that organization being taken out, they kept at it. It's crazy.shabbir (11:47)
Yeah, it it's fascinating. I I I don't wanna say there's there's probably no one should interpret what I'm about to say as I think that they are too slow about the investigation because doing an investigation well that'll hold up in court takes time. And you have to follow all the rules. The criminals don't have to follow any frickin' rules. You have to follow all the rules asSven (12:08)
Right. Yes.shabbir (12:10)
law enforcement and as a prosecutor.shabbir (12:13)
but I I I imagine that along the way there were opportunities to collect evidence on co conspirators to try and get a vision of the entire supply chain to see how they could really stop this crime instead of just making sort of some small arrest that would be handed off as a first offense minor, you imported one watch, two watches, right? At the point at which you've imported sixteen million dollars or so of of fake watches andshabbir (12:43)
sold them. Right. I think maybe it's time to build a better case. So my hat's off to C VP for the work here and for the U.S. attorney. and I think this is a really interesting moment. I mean I'm not really into watches. I think you are and I have friends who are, butSven (12:59)
Somewhat.shabbir (13:00)
the perfect super fake secondary market is gonna be a really interesting thing. When if if a watch doesn't hold valueshabbir (13:09)
because no one can tell the difference. I don't know what that does to to to the watch industry, but it's probably gonna devalue a lot of it.Sven (13:19)
Yeah. No, a hundred percent. And so, you know, to what you say, you know, with the timeline and I I looked at the same couple of things. A it started in twenty twenty, and then there was this little thing, the pandemic in between. So I'm sure that or not I'm sure, I know because I worked on it, C B P and A USAs and all of those were very busy with counterfeit masks, counterfeit vaccines, all the weird stuff thatSven (13:45)
People said you should inject or use or whatever that came into the country. So they were busy with COVID fraud. So that probably derailed that investigation. And that's also something to for also to keep for brand owners in mind when you sometimes think, I want for you to act quicker on my Rolex watch, for example. Yeah, but I might have something that has a direct health and safety impact, right? So I have fake vaccines, fake masks coming in. I'm gonna prioritize that over. I understand the watch is important, but I'm gonna prioritize that over.Sven (14:16)
And so I would assume that, you know, lay dormant for two years, maybe three years. And they picked it back up in twenty-three, prosecuted in twenty-four, they got most of them. The ring didn't shut down. She kept going. They're like, fine, we'll build more evidence for that person. Plus, that person was in China. And so they also needed for wait for that person to re-enter the United States. And once that person did that, they they they took advantage of it. So no, but 100%, 100% agree with you. The entire super fake.Sven (14:45)
system. And for this episode, I'm gonna try to find can we can we post TikTok links into our our show notes?shabbir (14:54)
Yeah, I'm sure we can, yes.Sven (14:56)
Right. I'll I'll I'll find I'll find a documentary, so to speak, that I was watching on TikTok, which is my social media vice of of choice. and they were looking at the super fake marketplace in China. And there are two companies that are known in China. One produces a almost impossible to identify outer case for the watch. So it's like the band and the metal and face and all of that.Sven (15:25)
And then there's a second company and they produce the internal mechanism. And that's that's and they work together. And but those two pieces are so good that you cannot distinguish them. Furthermore, those companies, as most criminal organizations do, don't just do it in one outlet. Like each one of them has multiple production facilities. So even if law enforcement takes one of them out, they just switch it over to the other. Andshabbir (15:50)
Yeah.Sven (15:51)
those watches were the ones thatSven (15:53)
I mean, I should put another link in there from the Wired folks, where the Wired reporter that we covered in the last podcast, I saw the video of him with the watch literally going to the Rolex store. And he's like, This is a counterfeit watch. I know it's a super fake because I bought it. And he goes in the store and he comes back out and he's like, and they told me what a beautiful piece you have. That's how good they are. Soshabbir (16:17)
Yeah.Sven (16:17)
yeah, it's a tremendous problem for for these for these companies.shabbir (16:22)
It's gonna be interesting to watch, but you know, that is the world we live in.Sven (16:28)
Well the the interestingSven (16:29)
piece here is now gonna kinda connect it actually back to what we had with the airbags. So I know you and I in the last pod were like, my God, if if Rolex is not freaked out about this. So I made some phone calls, called around and asked, and yes, Rolex is highly aware of this. They are very freaked out about it, but to a degree they also figured out we don't know exactly how to stop that. So what they did actually separately, Rolex had launched probably two years ago at this point.Sven (16:56)
A certified, like a Rolex certified pre owned program, which like if you want to make sure that the Rolex you buy on a secondary market is an authenticate Rolex, you sell it through their marketplace. And Rolex will basically take the watch, really authenticate it, and then say, Yes, that's a watch that we can authenticate is a Rolex. And then Rolex of that takes, of course, a cut from it, like they take a processing fee. So they make money twiceshabbir (17:22)
Of course.Sven (17:22)
on the watch, once the original and once on the resale.Sven (17:25)
Because they're like, fine, we'll just we'll just sell the watch twice and then we make money off that because we know we can't combat the counterfeit issue. So credit to them for that. But long term it might really, really continue to undermine what a Rolex is worth and how much they can charge. Because like every Rolex I now see on my friend's wrists. I'm like, I don't know if that's real, man. Because I don't.shabbir (17:52)
Yeah. Yeah, it's not like a Ferrari, right? If you buy a Ferrari, then you have these scheduled maintenances at the Ferrari dealershipSven (18:00)
I guess.shabbir (18:01)
every X thousand miles. They they definitely make a little bit of money keeping the car in shape over time. Rolex, until they invented this, doesn't necessarily have a a reason to make money on a watch once they sell it once.Sven (18:15)
Right, one one time sale and and normally you have you have collectors obviously who own many and you have the you can only have this Rolex if you already own five different ones. So they have like which Ferrari also is that model? which I I never understood what but it's fine. I'm not that much into watches. but yeah, no, it's it's it's a massive issue. And for folks that are following this, the upcoming special 301 notorious market reports will focusSven (18:42)
On superfakes. So the USTR is trying to understand. Okay, talk to us what all exists in the superfakes market. And so I think that'll be a very interesting special 301 notorious markets to read to see what are what are, and we will probably do a special episode on this. What are all the super fakes out there? Like watches, jewelry, bags. It'd be be fascinating what it is.shabbir (19:07)
I mean we I I personally you and I have personally seen the super fakes in the pharmaceutical world. They they actually have real serial numbers that are were really issued by the original manufacturer. Sometimes the counterfooters put them on a hundred different units, which is how you can know if you're looking at a hundred units with the same serial number that that that is not real. but those exist. and I'm sure that there's some others.shabbir (19:35)
you know in the in the electronics worldSven (19:38)
yeah. Well think of think about actually the the Gilead case, right? Where they were basically recycling existing bottles where they were basically buying bottles from the homeless community. Those were real bottles. So now that's actually a super fake because I can't authenticate that because it's a legit bottle, but you put something in it that's not it. So yeah, that probably that probably would also qualify as a super fake. Yeah.shabbir (20:02)
Some of them are probably super fakes. They're they're I've seen some of the pictures of the bottles from that litigation and some of them are very damaged after having been toted around by homeless people with the rest of their belongings. They're it's not an ideal storage environment.Sven (20:16)
It's a kind way of putting it. Fair point.shabbir (20:21)
Well that's all we have for today. Thanks everybody for watching and look at your watch real careful.Sven (20:28)
That's right. Shabbir,Sven (20:29)
have a wonderful weekend which is upcoming and please read us out.22 min - Imitation Nation Podcast No 37 Counterfeit News Audio
In this episode, Shabbir and Sven explore the complexities of counterfeit products, focusing on airbags and luxury watches. They discuss the challenges faced by online marketplaces in verifying authenticity and the broader implications for safety and brand integrity.
Transcript:
shabbir (00:01)
Sven welcome to episode number thirty seven, a prime number I'd point out of Imitation Nation.Sven (00:08)
Okay. That that took me a second to think, but yes, that is a prime number. happy Friday. How are you?shabbir (00:13)
I'm good. I usually try andSven (00:14)
Okay.shabbir (00:15)
pretend that I take Fridays off. I clearly never take Fridays off. But I am dressed down as if I am taking Friday off. In the sweatshirt of my daughter's high school, which is for all of us of a certain age, it's a fame high school, like from the TV shows. So she spends halfSven (00:31)
Nice.shabbir (00:32)
her day playing cello.Sven (00:33)
That's lovely. That actually was an excellent movie, side note. So today today is today is the 80s movie day. I reminded Stacy, one of our team members, today on some good 80s movie she should watch with everything developing in AI, I recommended she watch War Games. I don't know if you remember that movie with Matthew Broderick. Justshabbir (00:52)
Yes.Sven (00:53)
stuff just becoming really real. And I'm like, you might want to watch that because that's it's very, very relevant right now. Soshabbir (00:59)
The onlyshabbir (01:00)
winning move is not to play.Sven (01:02)
There you go, good quote,shabbir (01:03)
Ha ha ha.Sven (01:04)
like it. Well good to see you, sir.shabbir (01:08)
Good to see you and good to see us both in our home. I think we just recorded an episode recently from you in a hotel room in Colorado, which was a very scenic warm lamp you had, just like the one you have in your office.Sven (01:19)
That was lovely, yeah. No, and and this is one of the few where I'm not travelling. Starting next week it's gonna be it's gonna be a wild three months of travel.shabbir (01:29)
Yeah. ISven (01:30)
So you will see meSven (01:31)
in lots of unusual spots during our recordings, I think.shabbir (01:35)
I I am going to be traveling to visit with pa a patient victim next week and try and get her story on camera. And remains to be seen if I will be traveling internationally for more peptide victims, but we're finding them all over the world. People I'll just say this, we're not gonna do a whole story on this, but don't be taking those unapproved by the FDA peptides. That is not safe.Sven (01:58)
no.Sven (01:59)
No, and as as you and I talked about, because you you told me about this, I started researching it, and so I started researching it on my social media platforms. And because these algorithms now think that I like this or I'm looking for that, my entire social media feed is now full of this. And it is scary what's out there. So yeah, don't don't don't take any of this unapproved stuff. It's crazy.shabbir (02:24)
So I want to start talking about airbags becauseSven (02:29)
Okay.shabbir (02:30)
we have talked a lot about airbags, we talked about the big jury settlement, the big award, wrongfulSven (02:37)
Mm-hmm.shabbir (02:38)
death suit. In that case, the airbag was sold on eBay. And eBay responded this week by banning the sale of airbags on its platform. Not surprisingly.Sven (02:51)
I'm I'm sure it's completeSven (02:52)
completely uncorrelated. I'm sure it's completely uncorrelated.shabbir (02:57)
So this takes effect September twenty-fourth. eBay will probi prohibit the sale of all airbags and airbag inflators after a series of fatalities. I think we have nine or ten deaths in the US that have been traced to counterfeit airbags and the six hundred and three million dollar wrongful death verdict. The one young woman with children who don't have a mother anymore. the lawsuit did name eBay. I don't know if that was the deciding factor, but eBay has notshabbir (03:25)
eBay is not what I would call a poor actor all the time. I mean everybody has in the brand protection world has issues with eBay, but they it's you cannot call them non-responsive. but in this case they have chosen to to respond by banning the sale of of of airbags on its platform. And I I think you've looked at the other platforms that are that that have policies on airbags, Sven. What have you found?Sven (03:50)
no, and and I think, you know, well, so first of all, glad that eBay is doing this. Like it's one of those moves that's just it's very overdue. was the lawsuit a contributing factor? I would just say yes. I'm sure that they looked at it and say, hey, listen, this while they got dismissed from the lawsuit because of section 230 protection, a six hundred three million dollar verdict. You're like, you look at this and you're like, listen, that's not worth it. and but more importantly.Sven (04:17)
Is pretty much every other large platform: Amazon, Facebook Marketplace, Alibaba, AliExpress, all of them, and several other marketplaces already have adopted over the years the policy to not sell airbags because they're like, we can't verify them, right? We can't match them to a VIN and all of that, and people falsify them. And so they many of those most marketplaces already prohibited it. So for me, eBay is kind of.Sven (04:45)
catching up with that, which is great. I wouldn't be surprised if eBay as well as other marketplaces also start to ban all kinds of other automotive OEM parts like brake pads and all of that, because I can't verify it. And I've seen brake pads that are counterfeit that are made literally out of sawdust. and when you hit that on the highway, right? That's just gonna evaporate. So fromshabbir (05:07)
Yeah.Sven (05:07)
a pure liability perspectiveSven (05:09)
These platforms hopefully will get more cautious with with things that's really safety critical.shabbir (05:15)
Here's what I don't get.shabbir (05:19)
With all the resources that eBay has and all the cooperation that they could possibly get from manufacturers, what this basically says when you say we're banning the sale of airbags on our platform and airbag inflators is that we cannot tell you if someone lists it if it's real. Right? That is a huge infrastructure problem. AndSven (05:41)
Mm-hmm.shabbir (05:42)
for a marketplace, even with the cooperation of the manufacturer, to not be able to say that we cannot.shabbir (05:48)
demonstrate that this is real? Like they they could they could have taken the step that the only person allowed to sell airbags is a is an a manufacturer. Right? They could have taken that step, but they decided that that was even contained risk that they didn't want. What does it say when when even the largest marketplace, one of the largest marketplaces in the world with resources to do brand protection, throws up their hands and says, we can't do it. It's notshabbir (06:17)
It's not possible to tell youSven (06:18)
Yeah.shabbir (06:19)
if the airbag for sale is real or not. That's crazy.Sven (06:23)
And and I I I for that one I don't even blame eBay for it. I think, you know, you and I, because we deal a lot in the pharmaceutical world, which is a a wonderful world because it's a it's a closed distribution system. The US system is a closed distribution system, and it's only licensed parties are allowed to trade with each other. everybody should know that you're licensed, you ask for licenses. often they're licensed federal, state, municipality through.Sven (06:51)
That's a nice closed system. I know who's playing in it. For most other products, especially car OEMs, that doesn't exist. Almost anybody can buy automotive parts, especially secondary marketplace. So, like things that are replacement parts for repairs. There are wholesalers, there are sub jobbers, then there are repair places. So they never established a licensed marketplace. So it starts out with the I don't know who is allowed to sell.Sven (07:20)
And then what they're also missing, for example, in the pharmaceutical world, you have it. You have a you have a track and trace system with a serial number I can track. And in cars, you don't always have that. Now with airbags, they tried to solve it by linking the airbag to the VIN. but if it's a replacement one, I don't have a VIN to link it to. So they just didn't serialize. So it they don't have the basic fundamentals in place to either authenticate the seller.Sven (07:47)
or authenticate the product. And yeah, it's a it's a massive, it's a massive issue. In the oem market, it's a massive issue. It's generally the issue a lot of counterfeiters are dealing with that they don't have close distribution chains And that makes it really, really hard to combat counterfeit. So yeah, a hundred percent.shabbir (08:05)
That's really the takeaway. You cannot layer a secure online marketplace on an unlicensed, chaotic, lacking authorization physical supply chain. And that's what airbags are, right? It's not the maker Takata of the airbag listing on eBay. It's some reseller. And they apparently don't have a closed distribution chain for those resellers to be able to s tell eBay.shabbir (08:30)
And these are the only eleven companies allowed to sell.Sven (08:33)
That's exactly it. That's exactly it. And Takata might have they might have because I assume Takata's from overseas. So Takata probably has a distribution partner overseas, then they have several importers here. Those importers then ship to distributor partners here, those sell to sub jobbers, so you are you're three levels in and I have no chance to authenticate that. None.shabbir (08:55)
Yeah, and no licensing. Yeah. It's it's crazy. I'm I'm I'm glad to see eBay do it. I'm sorry they're the last ones. I actually like to think of them as being more more proactive than that, but it's a shame. But they did it and we should give them props for doing it. And it's becoming impossible to imagine that any airbag you buy online is not unsafe. Something I say about medicine every day.Sven (09:21)
Agreed.Sven (09:25)
All right, I have a second story. And the second story actually ties nicely into that. it's another industry where there is no certified seller-reseller network. There is no licensing scheme. There are not track and trace mechanisms in place. and when you have those conditions in place and you put a lot of valuable items into it, counterfeiters go like, that's a that's a fun one to exploit. And so it ties back to the fake watch and Rolex w story we wereSven (09:53)
covering a couple of weeks ago. You remember that we were talking about some major major seizures that were coming out of Louisville and and Indianapolis. just to refresh folks, that was where those two C B P ports have had seized a total of a hundred twenty five million of fake watches over the last couple of months and we just talked about that. So now now there's a new indictment that just came out where federal prosecutors in Connecticut charged a Brooklyn woman.Sven (10:21)
and she's accused of trafficking counterfeit Rolex, audemars piguet Panera watches in from China. And according to the indictment, CBP intercepted 74 separate parcels that she had shipped that were tied to the organization she works with, with a combined retail value of more than 16 million dollars, just that one individual in her group. and investigators seized roughly $900,000 in cash. So aSven (10:47)
big case that is connected to all of these seizures that C V P is doing increasingly.shabbir (10:53)
I I'm a successful adult white collar professional, but I'm not successful enough that there's nine hundred thousand dollars of cash lying around my house.Sven (11:02)
Normally not,Sven (11:03)
no. No. You know, and and what was really interesting about that case is the timeline. So the the DOJ or the the USA laid it out fantastically. The investigation and this entire Rolex scheme ready started in twenty twenty. So that's six years ago. Six years agoshabbir (11:23)
Yeah.Sven (11:23)
they started. They started to seize several items, they started to investigate.Sven (11:28)
Then in twenty twenty four they they arrested several members of that organization and they keep looking, keep digging before now this final defendant was now charged in twenty twenty six. So besides part of that organization being taken out, they kept at it. It's crazy.shabbir (11:47)
Yeah, it it's fascinating. I I I don't wanna say there's there's probably no one should interpret what I'm about to say as I think that they are too slow about the investigation because doing an investigation well that'll hold up in court takes time. And you have to follow all the rules. The criminals don't have to follow any frickin' rules. You have to follow all the rules asSven (12:08)
Right. Yes.shabbir (12:10)
law enforcement and as a prosecutor.shabbir (12:13)
but I I I imagine that along the way there were opportunities to collect evidence on co conspirators to try and get a vision of the entire supply chain to see how they could really stop this crime instead of just making sort of some small arrest that would be handed off as a first offense minor, you imported one watch, two watches, right? At the point at which you've imported sixteen million dollars or so of of fake watches andshabbir (12:43)
sold them. Right. I think maybe it's time to build a better case. So my hat's off to C VP for the work here and for the U.S. attorney. and I think this is a really interesting moment. I mean I'm not really into watches. I think you are and I have friends who are, butSven (12:59)
Somewhat.shabbir (13:00)
the perfect super fake secondary market is gonna be a really interesting thing. When if if a watch doesn't hold valueshabbir (13:09)
because no one can tell the difference. I don't know what that does to to to the watch industry, but it's probably gonna devalue a lot of it.Sven (13:19)
Yeah. No, a hundred percent. And so, you know, to what you say, you know, with the timeline and I I looked at the same couple of things. A it started in twenty twenty, and then there was this little thing, the pandemic in between. So I'm sure that or not I'm sure, I know because I worked on it, C B P and A USAs and all of those were very busy with counterfeit masks, counterfeit vaccines, all the weird stuff thatSven (13:45)
People said you should inject or use or whatever that came into the country. So they were busy with COVID fraud. So that probably derailed that investigation. And that's also something to for also to keep for brand owners in mind when you sometimes think, I want for you to act quicker on my Rolex watch, for example. Yeah, but I might have something that has a direct health and safety impact, right? So I have fake vaccines, fake masks coming in. I'm gonna prioritize that over. I understand the watch is important, but I'm gonna prioritize that over.Sven (14:16)
And so I would assume that, you know, lay dormant for two years, maybe three years. And they picked it back up in twenty-three, prosecuted in twenty-four, they got most of them. The ring didn't shut down. She kept going. They're like, fine, we'll build more evidence for that person. Plus, that person was in China. And so they also needed for wait for that person to re-enter the United States. And once that person did that, they they they took advantage of it. So no, but 100%, 100% agree with you. The entire super fake.Sven (14:45)
system. And for this episode, I'm gonna try to find can we can we post TikTok links into our our show notes?shabbir (14:54)
Yeah, I'm sure we can, yes.Sven (14:56)
Right. I'll I'll I'll find I'll find a documentary, so to speak, that I was watching on TikTok, which is my social media vice of of choice. and they were looking at the super fake marketplace in China. And there are two companies that are known in China. One produces a almost impossible to identify outer case for the watch. So it's like the band and the metal and face and all of that.Sven (15:25)
And then there's a second company and they produce the internal mechanism. And that's that's and they work together. And but those two pieces are so good that you cannot distinguish them. Furthermore, those companies, as most criminal organizations do, don't just do it in one outlet. Like each one of them has multiple production facilities. So even if law enforcement takes one of them out, they just switch it over to the other. Andshabbir (15:50)
Yeah.Sven (15:51)
those watches were the ones thatSven (15:53)
I mean, I should put another link in there from the Wired folks, where the Wired reporter that we covered in the last podcast, I saw the video of him with the watch literally going to the Rolex store. And he's like, This is a counterfeit watch. I know it's a super fake because I bought it. And he goes in the store and he comes back out and he's like, and they told me what a beautiful piece you have. That's how good they are. Soshabbir (16:17)
Yeah.Sven (16:17)
yeah, it's a tremendous problem for for these for these companies.shabbir (16:22)
It's gonna be interesting to watch, but you know, that is the world we live in.Sven (16:28)
Well the the interestingSven (16:29)
piece here is now gonna kinda connect it actually back to what we had with the airbags. So I know you and I in the last pod were like, my God, if if Rolex is not freaked out about this. So I made some phone calls, called around and asked, and yes, Rolex is highly aware of this. They are very freaked out about it, but to a degree they also figured out we don't know exactly how to stop that. So what they did actually separately, Rolex had launched probably two years ago at this point.Sven (16:56)
A certified, like a Rolex certified pre owned program, which like if you want to make sure that the Rolex you buy on a secondary market is an authenticate Rolex, you sell it through their marketplace. And Rolex will basically take the watch, really authenticate it, and then say, Yes, that's a watch that we can authenticate is a Rolex. And then Rolex of that takes, of course, a cut from it, like they take a processing fee. So they make money twiceshabbir (17:22)
Of course.Sven (17:22)
on the watch, once the original and once on the resale.Sven (17:25)
Because they're like, fine, we'll just we'll just sell the watch twice and then we make money off that because we know we can't combat the counterfeit issue. So credit to them for that. But long term it might really, really continue to undermine what a Rolex is worth and how much they can charge. Because like every Rolex I now see on my friend's wrists. I'm like, I don't know if that's real, man. Because I don't.shabbir (17:52)
Yeah. Yeah, it's not like a Ferrari, right? If you buy a Ferrari, then you have these scheduled maintenances at the Ferrari dealershipSven (18:00)
I guess.shabbir (18:01)
every X thousand miles. They they definitely make a little bit of money keeping the car in shape over time. Rolex, until they invented this, doesn't necessarily have a a reason to make money on a watch once they sell it once.Sven (18:15)
Right, one one time sale and and normally you have you have collectors obviously who own many and you have the you can only have this Rolex if you already own five different ones. So they have like which Ferrari also is that model? which I I never understood what but it's fine. I'm not that much into watches. but yeah, no, it's it's it's a massive issue. And for folks that are following this, the upcoming special 301 notorious market reports will focusSven (18:42)
On superfakes. So the USTR is trying to understand. Okay, talk to us what all exists in the superfakes market. And so I think that'll be a very interesting special 301 notorious markets to read to see what are what are, and we will probably do a special episode on this. What are all the super fakes out there? Like watches, jewelry, bags. It'd be be fascinating what it is.shabbir (19:07)
I mean we I I personally you and I have personally seen the super fakes in the pharmaceutical world. They they actually have real serial numbers that are were really issued by the original manufacturer. Sometimes the counterfooters put them on a hundred different units, which is how you can know if you're looking at a hundred units with the same serial number that that that is not real. but those exist. and I'm sure that there's some others.shabbir (19:35)
you know in the in the electronics worldSven (19:38)
yeah. Well think of think about actually the the Gilead case, right? Where they were basically recycling existing bottles where they were basically buying bottles from the homeless community. Those were real bottles. So now that's actually a super fake because I can't authenticate that because it's a legit bottle, but you put something in it that's not it. So yeah, that probably that probably would also qualify as a super fake. Yeah.shabbir (20:02)
Some of them are probably super fakes. They're they're I've seen some of the pictures of the bottles from that litigation and some of them are very damaged after having been toted around by homeless people with the rest of their belongings. They're it's not an ideal storage environment.Sven (20:16)
It's a kind way of putting it. Fair point.shabbir (20:21)
Well that's all we have for today. Thanks everybody for watching and look at your watch real careful.Sven (20:28)
That's right. Shabbir,Sven (20:29)
have a wonderful weekend which is upcoming and please read us out.22 min - Imitation Nation Podcast No 36 Piotr Stryszowski Interview VIDEO
In this week's episode of the Imitation Nation Podcast, Sven and Shabbir talk with Piotr Stryszowski, a long time expert in the global counterfeit trade problem. Check it out!
Shabbir (00:01)
Welcome to Imitation Nation. This is Imitation Nation, maybe episode 36, and we have our first European guest on. So this is the first time we've triedSven (00:11)
Yay.Shabbir (00:11)
to span an ocean. Our guest today is Piotr Stryszowski from the OECD. We've got a lot of exciting things to talk about. And if you don't follow Piotr on LinkedIn, you should.Shabbir (00:22)
And he has a he has a lot to say about the counterfeit trade and we're gonna talk a little about that today. But thank you for making time for us. It's very well it's very generous of you.Piotr (00:33)
Thank you for having me.Shabbir (00:34)
tell us a little bit about y how you got into illicit trade because you're obviously a international expert in illicit trade, which is why we we are so excited to talk to you. What what's your origin there? What's what was your entree and what do you find most fascinating?Piotr (00:52)
Well, Shabbir thank you so much for this introduction. I'm really honored. I'm an economist by training, right? So sometimes asking myself, who am I to tell people something? my best skill is to bring people to the table smarter than me, offer them some coffee, excellent French croissants, and listen to them. but back to your question. well, I'm an economist by training.Piotr (01:15)
Right, I did my PhD in the economics of IP, intellectual property, how actually intellectual property adds value to products, to countries. It's a legal concept, but how to assess economically IP? Is it possible? Right. That was that was my main thesis. and then after I completed this, I got a job at the OVCD.Piotr (01:41)
Where eventually, after some years, I ended up managing working party on countering illicit trade. Right, so it's it sounds a bit of a stretch from IP to illicit trade, but actually it's not. Right? The our working party is dedicated to understanding illicit trade today.Piotr (02:06)
At the OECD, well, we are mostly economists, right? we work with data. We want to understand things using data, using numbers. so when you apply this logic to illicit trade, you see that there is lots of counterfeit goods being smuggled today. That's explains the kind of the move from like an IP economist, smart, arrogant, and young.Piotr (02:32)
To well, I wish humble, humble bureaucrats trying to understand what's the hell is going on out there in this world. but well, thank you for mentioning me being as an expert, right? My my role here at the OECD, I see it, is to understand how illicit trade looks like and to help our member countries with the knowledge, right? But I gather knowledge from data.Piotr (02:58)
And from talking to people who know more about this subject than me.Sven (03:02)
Very cool. Well, Piotr, it's really, really nice to meet you. I read your most recent report w with a lot of interest. you know, for me I found it really, really fascinating that the study that we're gonna discuss, kinda report that you've done, it it's it's really the first study I've seen that had been done, and you were one of the lead authors on it that was trying to statistically demonstrate kind ofSven (03:28)
what the relationship is between forced labor and weaker labor protections and illicit trade. So can you talk about what what you have found in that report? What's the connection between forced labor and counterfeit goods? I I I'd love for you to share that.Piotr (03:47)
Excellent question. maybe before jumping to this question, some like background information. our work, I mean, we are in the international organization, right? Meaning that our work is overseen by our member countries. We're really proud to work for member countries, right? What we do is supposed to help countries and citizens, people in these countries. we work a lot with the United States.Piotr (04:13)
With the PTO, with DHS, with the State Department. And because we work for countries, sometimes we don't have the luxurySven (04:22)
Yeah.Piotr (04:22)
of going into our interpretations. We must be very conservative in what we publish, in what we what we do. Right? So I'm just saying this as a preemptive, well, I know how to say it.Piotr (04:36)
strike to say that our findings are sometimes trivial and obvious,Sven (04:40)
Yeah.Piotr (04:41)
right? Well you mentioned link between forced labor and counterfeit trade or trade in counterfeit goods. When you think about it conceptually it's in a way trivial or it becomes straightforward. But our work is really to to change a narrative from seems to into is right soSven (05:02)
AndPiotr (05:03)
We need to be comfortable to say, yes, there is a link, right? Or now our work, as I said, we want to gauge the problems, we want to understand the problems using data. And we have a big data set that comes from customs offices around the world of seizures of counterfeit goods, right? Basically.Piotr (05:28)
Customs officers that the are supposed to do 10,000 jobs, right? Seizing everything from well, narcotics to substandard medicines. They also need to seize counterfeits. And weSven (05:41)
Mm-hmm.Piotr (05:42)
receive regularly data from customs offices around the world about seizures of counterfeit products. What's been seized, where from, where to, quantities, brands, all the information.Piotr (05:56)
These data are confidential. We work with them in-house, we don't disclose them. What we disclose is just aggregates results. And we use this data really to understand better the trends in counterfeiting and relation of counterfeiting with other measurable phenomena.Sven (06:16)
Mm-hmm.Piotr (06:17)
But this is just to say that measuring counterfeiting is difficult, right? Customs data are not perfect.Piotr (06:24)
It's not like, you know, your weight, you put on a scale and say, crap, it's too much. I wishShabbir (06:28)
Yeah.Piotr (06:29)
my weight was measured with such precision as counterfeiting sometimes.Shabbir (06:33)
Ha ha ha ha.Sven (06:33)
Well yeah, since it'sSven (06:35)
no since it's clandestine in nature, it makes sense. It's much harder to see and you you try toPiotr (06:39)
Exactly.Sven (06:39)
triangulate it with all the data. So when when you looked at all of it and you're triangulating it all and you're looking at all the seizure data, what did what did you see? And how did you now make the correlation to force labor?Piotr (06:50)
Exactly. So I mean it it's it's not it's in a way easy, right? Our research is easy because we don't want to go too deep to keep robustness of results at a high level. We looked on the one hand at available measures of counterfeiting, right? Because these customs data provide us inputs into aggregated measures of counterfeiting. these measures are done at country level.Piotr (07:17)
We want to assess to what extent exporting countries export counterfeits. Right? So for each country in the world, we have a like an artificial index that assigns certain intensity. Of course, some countries are general exporters of everything, right? So this should be also taken into account. But we have this one on the one hand, we have index of counterfeiting. And here, on the other hand, we have existing measures of forced labor.Piotr (07:46)
Here we talk about available indices, right? And we need to take into account all other measures that could impact this relationship, right? So here, like being an economist, I'm throwing everything that comes to my mind, ranging from economic variables through some trade measures to also other socioeconomic variables. I look at trends, anything, anything that comes to mind. Just to check if there is a direct link.Piotr (08:15)
between both counterfeiting, export of counterfeits, and well protection of labor that cannot be explained by anything else. And here importantly, when we look at forced labor, we also looked at in accidents. So like I would say how safe labor conditions are, and at child labor, right? So like all different indices.Piotr (08:44)
yeah, that's what that was the that was the black box, right? That'sSven (08:47)
Yeah.Piotr (08:48)
in a way simple, right? We want to keep it simple. And and the findings are again not surprising. There is a link, there is a correlation between both. Counterfeiting, yeah.Sven (09:00)
So when you whenSven (09:02)
you just said there's a correlation, is there did you find a correlation or did you find a causation? Like which which link did you find?Piotr (09:09)
Well look here, I'm really no that we could not establish causality, right? but also when you think about it, I what would be what would be the origin of a problem? The fact that there is bad guys that export goods that are counterfeit, or the fact that these guys do not only I mean these guys don't it's not like they only don't care about IP laws but also about labor laws right? It's it's likePiotr (09:37)
Two sides of the same coin. And here I would say it's more a philosophical question about causality. It just says that there's bad guys who don't care about IP and who don't care about, well, human rights, right? Who just look for money, no ethics.Shabbir (09:53)
Yeah.Shabbir (09:58)
You know, we have talked on the on the podcast a lot about the change, the constant change in shipping requirements and and entry requirements in different countries. The biggest story, I think, for us that affects illicit trade is the change in what we in the US call de minimis shipping. I guess you might call it the same thing in Europe, but the rules around de minimis have been changing for the past two years, and they've had a really notable effect on illicit trade.Shabbir (10:27)
especially for illicit goods that come out of China into the US. At least that's that's the part I'm familiar with. what do you see in the in the regulatory environment and and how is it how do you see these changes in rules around small package, small value parcel shipping affecting the illicit trade market?Piotr (10:47)
Excellent question. Well, like firstly, we just talked about forced labor, right? Forced labor it's it's disgusting. It's it's awful. There is nothing good about forced labor, it's it's disgusting crime. I don't want us to think the same about small parcels. Small parcels are amazing.Piotr (11:10)
I would not survive COVID without small parcels.Shabbir (11:12)
Ha ha.Piotr (11:13)
So here we we deal with different phenomena, right? Small parcels are amazing. There's a huge revolution in how commerce operates, in how trade operates. It's being non-native speaker, I lack proper language, proper vocabulary to express the dynamism of small parcels. I know explosion, volcano.Piotr (11:35)
Billions of small parcels flying around the world. Amazing, amazing. And it is great, great for consumers. But at the same time, there are challenges, right? And the challenges are on the enforcement end. As I said at the beginning, like customs, they are like Swiss Army knives. They need to deal with 10,000 problems these days. And this of this explosion of small parcels, billions.Piotr (12:00)
of small parcels, right? Doesn't help the situation. So here the challenge is really how it's not like with forced labor, how to really crunch it, but how to make sure that customs are able to to do their job properly without really hindering consumers. And here the policies around the minimis rules, in my opinion, right, it's in my opinion, are a very relevant move, right?Piotr (12:28)
To end the abuse by many bad actors of this fantastic solution that is that is small parcels, right? But again, it's I think it's a bit too early to say how it will work. From what we see is that counterfeiters and bad guys are very smart. So it might be that thoseShabbir (12:44)
Yes.Piotr (12:45)
bad things that used to enter the US are right now being rerouted and going to other countries.Piotr (12:52)
We've seen it like the COVID was a great example of such thing where many borders were closed. It's like a labyrinth with some you know walls moving, and you can see that illicit trade finds a new route. So we've seen seizures in places that a few years ago were relatively free or not so intensely abused by bad guys. Here with de minimis, we certainly need to wait to see the results, how the impact will look like.Piotr (13:21)
And also we would need some coordination between different countries, introducing de minimis, right? Not to say that okay, the dam is right now here, so the water will just will just go this way.Shabbir (13:33)
Yeah, I mean I think given the fact that we've watched we watched data come out and it's sometimes a year or two old from let's say the UK Customs Authority, I think we're gonna probably be studying the effects of of these regulatory changes for for years before we really have a good handle on it.Piotr (13:52)
Exactly. But again, small parcels are great. It's just like from my perspective, for many years the regulatory environment, maybe not regulatory, but the policy environment, international environment around small parcels, was not updated, right? So in many countries we still deal with paper, right? So it's it's pretty old.Piotr (14:15)
And here we talk whenShabbir (14:15)
Yes.Piotr (14:16)
we talk small parcels, we also talk about e-commerce, which which shrinks the whole global trade into one computer or one iPhone, right? So it's there is this discrepancy between advancement in technology that allows consumers to kind of shop everywhere, and relative rigidity of enforcement. And not only national enforcement, but also international collaboration in enforcement.Piotr (14:41)
enforcement.Sven (14:43)
Yeah, it was it was really interesting for me when I when I read the when I read the report, kind of what you talked about, finding the, you know, correlation between, for example, child labor, forced labor, and counterfeiting, and then reading even further. And I found it fascinating when I read that there's a negative correlation actually to unions. So the more unions a country has, the less likely it actually is that they have either forced labor and or therefore have counterfeiting.Sven (15:11)
And now talking about de minimis, that kind of all makes sense. Like the more lax and a regulatory environment of a country is, like the less they have or the less organized it is, the more porous it is, so to speak, the more and more it is able for people to conduct counterfeit operations in that country because you just have a very porous regulatory environment. So that was a really cool correlation that your report laid out there.Piotr (15:38)
Well, thank you. I mean, we try to look at these correlations all the time to understand better the environment around counterfeiting. And here kind of a trivial statement that counterfeiting is not something that I would say poor countries can specialize in, right? It requires a certain degree of development. It requires good production network.Piotr (16:02)
It requires good trading infrastructure. So I wouldn't say that this is kind of a way for poor countries to cope with development gaps and go ahead. No, when you look actually at the at the list of countries with respect to their likelihoods to do counterfeiting, you see many wealthy countries there.Sven (16:24)
No, it's interesting. So actually switching topics a little bit when you say, you know, always interesting to see when you kind of look at broader at the data, what are some of the trends you're seeing coming up in counterfeiting? So we recently on a on a pod last week we talked about some extremely sophisticated, good looking super fakes, fake luxury watches that were so good that a reporter from Wired magazine was actually able to take into a Rolex dealer.Sven (16:51)
and they actually service those watches. That's how convincing those counterfeit watches were. what what are you seeing kind of as a trend in counterfeiting overall that is of of concern for you.Piotr (17:03)
greatPiotr (17:03)
question. I would say my biggest concern is that the planet of counterfeiting is so huge, it's really hard to hard to find a common denominator. Right? It's like counterfeiters are smart businessmen that look for money. And because today's world relies on IP, trademarks are everywhere, there is lots of money, lots of opportunities.Piotr (17:30)
Right? The example you gave about watches. well, counterfeiters no longer just fool casual buyers, they also beat trained experts. well, we call it two types of markets: primary market and secondary market. Secondary market is like cheap counterfeits that you can just buy on the corner of a street that are not supposed to fool even consumers, right? That's I suppose yeah, like luxury goods that you know what you're buying, right? SoShabbir (17:56)
Mm-hmm.Piotr (17:56)
cheap.Piotr (17:57)
Must be fake. But at the same time, there are many counterfeits flying around that are supposed to fool experts. Or at least at least those that introduce them to the official supply chain. Here it's not only about luxury goods, it's also spare parts. Right? You go with your car to a garage, you pay full price for a spare part, and then oof.Piotr (18:24)
It's also about medicines, food, toys, right? I have three kids. I want to pay a lot to make sure they are safe.Shabbir (18:35)
Yeah.Piotr (18:36)
Right? So I'm a potential target for counterfeiters. Right? So there is this primary-secondary market, right? This kind of fooling consumers because it's money. And withPiotr (18:48)
e-commerce everywhere with such an ease of access right to online shops, it becomes easy. So I would say that's that's the trend. That's what we can see today. Well another another I would say trend or or phenomenon is that counterfeiting impacts all products that have trademark on them.Piotr (19:10)
Sometimes when it say counterfeit you think like fake, well whatever, luxury bags or some watches in the example. Well, when you look at the data, when I look at our data and imagine that on the horizontal axis you have different product, like product categories, and on the vertical axis you have intensity of counterfeiting. Say 20 years ago it was like pretty skewed towards luxury goods. Now it becomes flatter and flatter.Piotr (19:39)
Right, so what used to be anecdotal or like funny becomes now like well, it's it's more regular, right? OrSven (19:47)
Yeah.Piotr (19:47)
what used to be free from counterfeiting now becomes anecdotal. here there are many anecdotes that might sound funny, but they're only initially funny, like well, fake guitars, fake cement, fake electricity switches.Piotr (20:06)
Fake baby formulas, fake cat food, right? EvenShabbir (20:12)
Yeah.Piotr (20:13)
yeah, there's everything can be fake. Everything because IP adds value to products. IP is trust, IP is quality. So anything can be a target, especially in the world where customs deal with ten thousand different priorities.Sven (20:28)
Yeah, no, I I think you make a very goodShabbir (20:29)
Yeah, we did a s weShabbir (20:31)
we covered a story about counterfeit sinks that possessed a a a special mark that's supposed to denote them as being compliant with plumbing standards. And I thought, well, I have seen it all now.Sven (20:44)
Yeah, no, you you make a really good point. You know, I've been in the in the anti-counterfeiting business for, yeah, at this point, almost, you know, twenty, twenty, twenty-five years. And it it was it was interesting when I started in that kind of business, so to speak, right? I I sat for an advisory board on the youth chamber of commerce. And you're right, at that time it basically was large movie studios, a couple of software piracy issues that that existed, and mostly luxury goods, right?Sven (21:12)
we were there, I was there with Philip Morris and we were tobacco was was a large issue as well. And then you're right, the table started to fill over over the decades and it became more and more of every product that can be counterfeited, started to be counterfeited. As long as there's a margin there, as long as there's a market there, as long as they can make money there, and with the increasing, you know, global proliferation of trade and making the internet purchase easier and easier, you're right, that table started to fill up.Sven (21:41)
quite a bit with with new members.Piotr (21:44)
Everything right and actually it's not funny, it's it's scary. It's scary because at the end of the day we are exposed to unknown goods that can that can harm us, that can steal our jobs, that can really rip off taxes. So it's a real problem. It's not a funny anecdote that's yeah makesSven (22:02)
Agree.Piotr (22:02)
us laugh, it's it's it's a problem.Sven (22:05)
Yeah, there's two key takeaways I have from from today with you that just reiterated for anybody who is listening, right? So if if you work in a company and you have a trademark or you work on a product and you you start to listen to these podcasts because you think Shabbir and I are interesting, but you thought deep inside you're like, that doesn't happen in my company. I I I warn you and I beg you to take a deeper look. There's a if your product is selling, if you have a good market, there's most likely counterfeit somewhere andSven (22:31)
I think what also Piotr here said, understand that that counterfeit is not just a it's a nuisance or it's a it's a you know kind of funny story as as Piotr called it. But no, it actually has large crime implications. Plus, it can thrive in countries that have really, really bad human labor standards. And so therefore it fosters human slave forced child labor, all of that. So I think you make a very good.Sven (22:55)
point Piotr. I think a lot of people underestimate and think like, it's just luxury bags. No, it's not. If your product sells, you you most likely will have counterfeit somewhere.Piotr (23:06)
Absolutely. You said it Sven Yeah.Sven (23:09)
No, you said it. I just recapped it.Shabbir (23:11)
Well, and I'll say, you know, that the the the the report, your your fakes and forced labor correlative report really just reiterates something that is has been a a theme for me in the world of counterfeits, which is that if you're willing to break one law, you'll break all of them. Right. So you don't violate the IP but then obey all the material safety standards to you know, and which is how you end up with a hat that hasShabbir (23:37)
Formaldehyde chemicals in it that's also a copy of a you know a World Cup logo hat. Once you start breaking laws, you it's easy to break them all.Sven (23:46)
Yeah, not a lot of not a lot of unionized counterfeiters.Piotr (23:47)
Absolutely.Shabbir (23:50)
Yeah.Piotr (23:50)
WellPiotr (23:51)
but not only hats, spare parts, right? Pharmaceuticals, medical devices, food, toys, IT equipment, batteries. There's lots of lots of stuff there that's really dangerous.Shabbir (24:05)
Yeah. Piotr, before we go, do you is there anything you want to touch on that we didn't cover?Piotr (24:12)
Well thank you. I it was it was amazing. And again, thank you so much. Well, I bet once I disconnect I'll think, I should say this or that. But yeah, that's that's life. That's my messy nature. So thank you for havingShabbir (24:22)
Well, I'm I'mPiotr (24:24)
me.Shabbir (24:25)
I'm gonna suggest that people do what I do, which is I follow you on LinkedIn. And that also leads me to the blog at OECD that you occasionally contribute to, where you where when you when you are have published something or have something to say, it often appears there. is there anywhere else that people should follow you or follow your work?Piotr (24:44)
Well LinkedIn of course and for those that you don't know me, my surname looks like a sale of consonants, but I'm the only Piotr I think on the OECD. So just type Google Piotr OECD to find me. Otherwise OECD illicit trade is kind of a website of our small small unit here that monitors illicit trade, tries to understand what's going on out there.Shabbir (25:08)
We will put all that in the show notes and thank you for joining us today and staying up so late in f in France so that you can make this interview.Piotr (25:17)
Thank you for having me.Sven (25:18)
Well Piotr it was an absolute pleasure meeting you and with that, Shabbir, read us out.Piotr (25:24)
Thank you.27 min - Imitation Nation Podcast No 36 Piotr Stryszowski Interview AUDIO
In this week's episode of the Imitation Nation Podcast, Sven and Shabbir talk with Piotr Stryszowski, a long time expert in the global counterfeit trade problem. Check it out!
Shabbir (00:01)
Welcome to Imitation Nation. This is Imitation Nation, maybe episode 36, and we have our first European guest on. So this is the first time we've triedSven (00:11)
Yay.Shabbir (00:11)
to span an ocean. Our guest today is Piotr Stryszowski from the OECD. We've got a lot of exciting things to talk about. And if you don't follow Piotr on LinkedIn, you should.Shabbir (00:22)
And he has a he has a lot to say about the counterfeit trade and we're gonna talk a little about that today. But thank you for making time for us. It's very well it's very generous of you.Piotr (00:33)
Thank you for having me.Shabbir (00:34)
tell us a little bit about y how you got into illicit trade because you're obviously a international expert in illicit trade, which is why we we are so excited to talk to you. What what's your origin there? What's what was your entree and what do you find most fascinating?Piotr (00:52)
Well, Shabbir thank you so much for this introduction. I'm really honored. I'm an economist by training, right? So sometimes asking myself, who am I to tell people something? my best skill is to bring people to the table smarter than me, offer them some coffee, excellent French croissants, and listen to them. but back to your question. well, I'm an economist by training.Piotr (01:15)
Right, I did my PhD in the economics of IP, intellectual property, how actually intellectual property adds value to products, to countries. It's a legal concept, but how to assess economically IP? Is it possible? Right. That was that was my main thesis. and then after I completed this, I got a job at the OVCD.Piotr (01:41)
Where eventually, after some years, I ended up managing working party on countering illicit trade. Right, so it's it sounds a bit of a stretch from IP to illicit trade, but actually it's not. Right? The our working party is dedicated to understanding illicit trade today.Piotr (02:06)
At the OECD, well, we are mostly economists, right? we work with data. We want to understand things using data, using numbers. so when you apply this logic to illicit trade, you see that there is lots of counterfeit goods being smuggled today. That's explains the kind of the move from like an IP economist, smart, arrogant, and young.Piotr (02:32)
To well, I wish humble, humble bureaucrats trying to understand what's the hell is going on out there in this world. but well, thank you for mentioning me being as an expert, right? My my role here at the OECD, I see it, is to understand how illicit trade looks like and to help our member countries with the knowledge, right? But I gather knowledge from data.Piotr (02:58)
And from talking to people who know more about this subject than me.Sven (03:02)
Very cool. Well, Piotr, it's really, really nice to meet you. I read your most recent report w with a lot of interest. you know, for me I found it really, really fascinating that the study that we're gonna discuss, kinda report that you've done, it it's it's really the first study I've seen that had been done, and you were one of the lead authors on it that was trying to statistically demonstrate kind ofSven (03:28)
what the relationship is between forced labor and weaker labor protections and illicit trade. So can you talk about what what you have found in that report? What's the connection between forced labor and counterfeit goods? I I I'd love for you to share that.Piotr (03:47)
Excellent question. maybe before jumping to this question, some like background information. our work, I mean, we are in the international organization, right? Meaning that our work is overseen by our member countries. We're really proud to work for member countries, right? What we do is supposed to help countries and citizens, people in these countries. we work a lot with the United States.Piotr (04:13)
With the PTO, with DHS, with the State Department. And because we work for countries, sometimes we don't have the luxurySven (04:22)
Yeah.Piotr (04:22)
of going into our interpretations. We must be very conservative in what we publish, in what we what we do. Right? So I'm just saying this as a preemptive, well, I know how to say it.Piotr (04:36)
strike to say that our findings are sometimes trivial and obvious,Sven (04:40)
Yeah.Piotr (04:41)
right? Well you mentioned link between forced labor and counterfeit trade or trade in counterfeit goods. When you think about it conceptually it's in a way trivial or it becomes straightforward. But our work is really to to change a narrative from seems to into is right soSven (05:02)
AndPiotr (05:03)
We need to be comfortable to say, yes, there is a link, right? Or now our work, as I said, we want to gauge the problems, we want to understand the problems using data. And we have a big data set that comes from customs offices around the world of seizures of counterfeit goods, right? Basically.Piotr (05:28)
Customs officers that the are supposed to do 10,000 jobs, right? Seizing everything from well, narcotics to substandard medicines. They also need to seize counterfeits. And weSven (05:41)
Mm-hmm.Piotr (05:42)
receive regularly data from customs offices around the world about seizures of counterfeit products. What's been seized, where from, where to, quantities, brands, all the information.Piotr (05:56)
These data are confidential. We work with them in-house, we don't disclose them. What we disclose is just aggregates results. And we use this data really to understand better the trends in counterfeiting and relation of counterfeiting with other measurable phenomena.Sven (06:16)
Mm-hmm.Piotr (06:17)
But this is just to say that measuring counterfeiting is difficult, right? Customs data are not perfect.Piotr (06:24)
It's not like, you know, your weight, you put on a scale and say, crap, it's too much. I wishShabbir (06:28)
Yeah.Piotr (06:29)
my weight was measured with such precision as counterfeiting sometimes.Shabbir (06:33)
Ha ha ha ha.Sven (06:33)
Well yeah, since it'sSven (06:35)
no since it's clandestine in nature, it makes sense. It's much harder to see and you you try toPiotr (06:39)
Exactly.Sven (06:39)
triangulate it with all the data. So when when you looked at all of it and you're triangulating it all and you're looking at all the seizure data, what did what did you see? And how did you now make the correlation to force labor?Piotr (06:50)
Exactly. So I mean it it's it's not it's in a way easy, right? Our research is easy because we don't want to go too deep to keep robustness of results at a high level. We looked on the one hand at available measures of counterfeiting, right? Because these customs data provide us inputs into aggregated measures of counterfeiting. these measures are done at country level.Piotr (07:17)
We want to assess to what extent exporting countries export counterfeits. Right? So for each country in the world, we have a like an artificial index that assigns certain intensity. Of course, some countries are general exporters of everything, right? So this should be also taken into account. But we have this one on the one hand, we have index of counterfeiting. And here, on the other hand, we have existing measures of forced labor.Piotr (07:46)
Here we talk about available indices, right? And we need to take into account all other measures that could impact this relationship, right? So here, like being an economist, I'm throwing everything that comes to my mind, ranging from economic variables through some trade measures to also other socioeconomic variables. I look at trends, anything, anything that comes to mind. Just to check if there is a direct link.Piotr (08:15)
between both counterfeiting, export of counterfeits, and well protection of labor that cannot be explained by anything else. And here importantly, when we look at forced labor, we also looked at in accidents. So like I would say how safe labor conditions are, and at child labor, right? So like all different indices.Piotr (08:44)
yeah, that's what that was the that was the black box, right? That'sSven (08:47)
Yeah.Piotr (08:48)
in a way simple, right? We want to keep it simple. And and the findings are again not surprising. There is a link, there is a correlation between both. Counterfeiting, yeah.Sven (09:00)
So when you whenSven (09:02)
you just said there's a correlation, is there did you find a correlation or did you find a causation? Like which which link did you find?Piotr (09:09)
Well look here, I'm really no that we could not establish causality, right? but also when you think about it, I what would be what would be the origin of a problem? The fact that there is bad guys that export goods that are counterfeit, or the fact that these guys do not only I mean these guys don't it's not like they only don't care about IP laws but also about labor laws right? It's it's likePiotr (09:37)
Two sides of the same coin. And here I would say it's more a philosophical question about causality. It just says that there's bad guys who don't care about IP and who don't care about, well, human rights, right? Who just look for money, no ethics.Shabbir (09:53)
Yeah.Shabbir (09:58)
You know, we have talked on the on the podcast a lot about the change, the constant change in shipping requirements and and entry requirements in different countries. The biggest story, I think, for us that affects illicit trade is the change in what we in the US call de minimis shipping. I guess you might call it the same thing in Europe, but the rules around de minimis have been changing for the past two years, and they've had a really notable effect on illicit trade.Shabbir (10:27)
especially for illicit goods that come out of China into the US. At least that's that's the part I'm familiar with. what do you see in the in the regulatory environment and and how is it how do you see these changes in rules around small package, small value parcel shipping affecting the illicit trade market?Piotr (10:47)
Excellent question. Well, like firstly, we just talked about forced labor, right? Forced labor it's it's disgusting. It's it's awful. There is nothing good about forced labor, it's it's disgusting crime. I don't want us to think the same about small parcels. Small parcels are amazing.Piotr (11:10)
I would not survive COVID without small parcels.Shabbir (11:12)
Ha ha.Piotr (11:13)
So here we we deal with different phenomena, right? Small parcels are amazing. There's a huge revolution in how commerce operates, in how trade operates. It's being non-native speaker, I lack proper language, proper vocabulary to express the dynamism of small parcels. I know explosion, volcano.Piotr (11:35)
Billions of small parcels flying around the world. Amazing, amazing. And it is great, great for consumers. But at the same time, there are challenges, right? And the challenges are on the enforcement end. As I said at the beginning, like customs, they are like Swiss Army knives. They need to deal with 10,000 problems these days. And this of this explosion of small parcels, billions.Piotr (12:00)
of small parcels, right? Doesn't help the situation. So here the challenge is really how it's not like with forced labor, how to really crunch it, but how to make sure that customs are able to to do their job properly without really hindering consumers. And here the policies around the minimis rules, in my opinion, right, it's in my opinion, are a very relevant move, right?Piotr (12:28)
To end the abuse by many bad actors of this fantastic solution that is that is small parcels, right? But again, it's I think it's a bit too early to say how it will work. From what we see is that counterfeiters and bad guys are very smart. So it might be that thoseShabbir (12:44)
Yes.Piotr (12:45)
bad things that used to enter the US are right now being rerouted and going to other countries.Piotr (12:52)
We've seen it like the COVID was a great example of such thing where many borders were closed. It's like a labyrinth with some you know walls moving, and you can see that illicit trade finds a new route. So we've seen seizures in places that a few years ago were relatively free or not so intensely abused by bad guys. Here with de minimis, we certainly need to wait to see the results, how the impact will look like.Piotr (13:21)
And also we would need some coordination between different countries, introducing de minimis, right? Not to say that okay, the dam is right now here, so the water will just will just go this way.Shabbir (13:33)
Yeah, I mean I think given the fact that we've watched we watched data come out and it's sometimes a year or two old from let's say the UK Customs Authority, I think we're gonna probably be studying the effects of of these regulatory changes for for years before we really have a good handle on it.Piotr (13:52)
Exactly. But again, small parcels are great. It's just like from my perspective, for many years the regulatory environment, maybe not regulatory, but the policy environment, international environment around small parcels, was not updated, right? So in many countries we still deal with paper, right? So it's it's pretty old.Piotr (14:15)
And here we talk whenShabbir (14:15)
Yes.Piotr (14:16)
we talk small parcels, we also talk about e-commerce, which which shrinks the whole global trade into one computer or one iPhone, right? So it's there is this discrepancy between advancement in technology that allows consumers to kind of shop everywhere, and relative rigidity of enforcement. And not only national enforcement, but also international collaboration in enforcement.Piotr (14:41)
enforcement.Sven (14:43)
Yeah, it was it was really interesting for me when I when I read the when I read the report, kind of what you talked about, finding the, you know, correlation between, for example, child labor, forced labor, and counterfeiting, and then reading even further. And I found it fascinating when I read that there's a negative correlation actually to unions. So the more unions a country has, the less likely it actually is that they have either forced labor and or therefore have counterfeiting.Sven (15:11)
And now talking about de minimis, that kind of all makes sense. Like the more lax and a regulatory environment of a country is, like the less they have or the less organized it is, the more porous it is, so to speak, the more and more it is able for people to conduct counterfeit operations in that country because you just have a very porous regulatory environment. So that was a really cool correlation that your report laid out there.Piotr (15:38)
Well, thank you. I mean, we try to look at these correlations all the time to understand better the environment around counterfeiting. And here kind of a trivial statement that counterfeiting is not something that I would say poor countries can specialize in, right? It requires a certain degree of development. It requires good production network.Piotr (16:02)
It requires good trading infrastructure. So I wouldn't say that this is kind of a way for poor countries to cope with development gaps and go ahead. No, when you look actually at the at the list of countries with respect to their likelihoods to do counterfeiting, you see many wealthy countries there.Sven (16:24)
No, it's interesting. So actually switching topics a little bit when you say, you know, always interesting to see when you kind of look at broader at the data, what are some of the trends you're seeing coming up in counterfeiting? So we recently on a on a pod last week we talked about some extremely sophisticated, good looking super fakes, fake luxury watches that were so good that a reporter from Wired magazine was actually able to take into a Rolex dealer.Sven (16:51)
and they actually service those watches. That's how convincing those counterfeit watches were. what what are you seeing kind of as a trend in counterfeiting overall that is of of concern for you.Piotr (17:03)
greatPiotr (17:03)
question. I would say my biggest concern is that the planet of counterfeiting is so huge, it's really hard to hard to find a common denominator. Right? It's like counterfeiters are smart businessmen that look for money. And because today's world relies on IP, trademarks are everywhere, there is lots of money, lots of opportunities.Piotr (17:30)
Right? The example you gave about watches. well, counterfeiters no longer just fool casual buyers, they also beat trained experts. well, we call it two types of markets: primary market and secondary market. Secondary market is like cheap counterfeits that you can just buy on the corner of a street that are not supposed to fool even consumers, right? That's I suppose yeah, like luxury goods that you know what you're buying, right? SoShabbir (17:56)
Mm-hmm.Piotr (17:56)
cheap.Piotr (17:57)
Must be fake. But at the same time, there are many counterfeits flying around that are supposed to fool experts. Or at least at least those that introduce them to the official supply chain. Here it's not only about luxury goods, it's also spare parts. Right? You go with your car to a garage, you pay full price for a spare part, and then oof.Piotr (18:24)
It's also about medicines, food, toys, right? I have three kids. I want to pay a lot to make sure they are safe.Shabbir (18:35)
Yeah.Piotr (18:36)
Right? So I'm a potential target for counterfeiters. Right? So there is this primary-secondary market, right? This kind of fooling consumers because it's money. And withPiotr (18:48)
e-commerce everywhere with such an ease of access right to online shops, it becomes easy. So I would say that's that's the trend. That's what we can see today. Well another another I would say trend or or phenomenon is that counterfeiting impacts all products that have trademark on them.Piotr (19:10)
Sometimes when it say counterfeit you think like fake, well whatever, luxury bags or some watches in the example. Well, when you look at the data, when I look at our data and imagine that on the horizontal axis you have different product, like product categories, and on the vertical axis you have intensity of counterfeiting. Say 20 years ago it was like pretty skewed towards luxury goods. Now it becomes flatter and flatter.Piotr (19:39)
Right, so what used to be anecdotal or like funny becomes now like well, it's it's more regular, right? OrSven (19:47)
Yeah.Piotr (19:47)
what used to be free from counterfeiting now becomes anecdotal. here there are many anecdotes that might sound funny, but they're only initially funny, like well, fake guitars, fake cement, fake electricity switches.Piotr (20:06)
Fake baby formulas, fake cat food, right? EvenShabbir (20:12)
Yeah.Piotr (20:13)
yeah, there's everything can be fake. Everything because IP adds value to products. IP is trust, IP is quality. So anything can be a target, especially in the world where customs deal with ten thousand different priorities.Sven (20:28)
Yeah, no, I I think you make a very goodShabbir (20:29)
Yeah, we did a s weShabbir (20:31)
we covered a story about counterfeit sinks that possessed a a a special mark that's supposed to denote them as being compliant with plumbing standards. And I thought, well, I have seen it all now.Sven (20:44)
Yeah, no, you you make a really good point. You know, I've been in the in the anti-counterfeiting business for, yeah, at this point, almost, you know, twenty, twenty, twenty-five years. And it it was it was interesting when I started in that kind of business, so to speak, right? I I sat for an advisory board on the youth chamber of commerce. And you're right, at that time it basically was large movie studios, a couple of software piracy issues that that existed, and mostly luxury goods, right?Sven (21:12)
we were there, I was there with Philip Morris and we were tobacco was was a large issue as well. And then you're right, the table started to fill over over the decades and it became more and more of every product that can be counterfeited, started to be counterfeited. As long as there's a margin there, as long as there's a market there, as long as they can make money there, and with the increasing, you know, global proliferation of trade and making the internet purchase easier and easier, you're right, that table started to fill up.Sven (21:41)
quite a bit with with new members.Piotr (21:44)
Everything right and actually it's not funny, it's it's scary. It's scary because at the end of the day we are exposed to unknown goods that can that can harm us, that can steal our jobs, that can really rip off taxes. So it's a real problem. It's not a funny anecdote that's yeah makesSven (22:02)
Agree.Piotr (22:02)
us laugh, it's it's it's a problem.Sven (22:05)
Yeah, there's two key takeaways I have from from today with you that just reiterated for anybody who is listening, right? So if if you work in a company and you have a trademark or you work on a product and you you start to listen to these podcasts because you think Shabbir and I are interesting, but you thought deep inside you're like, that doesn't happen in my company. I I I warn you and I beg you to take a deeper look. There's a if your product is selling, if you have a good market, there's most likely counterfeit somewhere andSven (22:31)
I think what also Piotr here said, understand that that counterfeit is not just a it's a nuisance or it's a it's a you know kind of funny story as as Piotr called it. But no, it actually has large crime implications. Plus, it can thrive in countries that have really, really bad human labor standards. And so therefore it fosters human slave forced child labor, all of that. So I think you make a very good.Sven (22:55)
point Piotr. I think a lot of people underestimate and think like, it's just luxury bags. No, it's not. If your product sells, you you most likely will have counterfeit somewhere.Piotr (23:06)
Absolutely. You said it Sven Yeah.Sven (23:09)
No, you said it. I just recapped it.Shabbir (23:11)
Well, and I'll say, you know, that the the the the report, your your fakes and forced labor correlative report really just reiterates something that is has been a a theme for me in the world of counterfeits, which is that if you're willing to break one law, you'll break all of them. Right. So you don't violate the IP but then obey all the material safety standards to you know, and which is how you end up with a hat that hasShabbir (23:37)
Formaldehyde chemicals in it that's also a copy of a you know a World Cup logo hat. Once you start breaking laws, you it's easy to break them all.Sven (23:46)
Yeah, not a lot of not a lot of unionized counterfeiters.Piotr (23:47)
Absolutely.Shabbir (23:50)
Yeah.Piotr (23:50)
WellPiotr (23:51)
but not only hats, spare parts, right? Pharmaceuticals, medical devices, food, toys, IT equipment, batteries. There's lots of lots of stuff there that's really dangerous.Shabbir (24:05)
Yeah. Piotr, before we go, do you is there anything you want to touch on that we didn't cover?Piotr (24:12)
Well thank you. I it was it was amazing. And again, thank you so much. Well, I bet once I disconnect I'll think, I should say this or that. But yeah, that's that's life. That's my messy nature. So thank you for havingShabbir (24:22)
Well, I'm I'mPiotr (24:24)
me.Shabbir (24:25)
I'm gonna suggest that people do what I do, which is I follow you on LinkedIn. And that also leads me to the blog at OECD that you occasionally contribute to, where you where when you when you are have published something or have something to say, it often appears there. is there anywhere else that people should follow you or follow your work?Piotr (24:44)
Well LinkedIn of course and for those that you don't know me, my surname looks like a sale of consonants, but I'm the only Piotr I think on the OECD. So just type Google Piotr OECD to find me. Otherwise OECD illicit trade is kind of a website of our small small unit here that monitors illicit trade, tries to understand what's going on out there.Shabbir (25:08)
We will put all that in the show notes and thank you for joining us today and staying up so late in f in France so that you can make this interview.Piotr (25:17)
Thank you for having me.Sven (25:18)
Well Piotr it was an absolute pleasure meeting you and with that, Shabbir, read us out.Piotr (25:24)
Thank you.27 min - Imitation Nation Podcast No 35 Counterfeit News Video Version
In this episode of the Imitation Nation podcast, Sven and Shabbir explore the evolving landscape of counterfeit goods, from pharmaceuticals to luxury watches, and the technological innovations fighting back. They also discuss how counterfeiters adapt, the importance of brand protection, and the future of digital counterfeiting.
25 min - Imitation Nation Podcast No 35 Counterfeit News Audio Version
In this episode of the Imitation Nation podcast, Sven and Shabbir explore the evolving landscape of counterfeit goods, from pharmaceuticals to luxury watches, and the technological innovations fighting back. They also discuss how counterfeiters adapt, the importance of brand protection, and the future of digital counterfeiting.
25 min - Imitation Nation Podcast No 34 Interview with Mark Karhoff AUDIO Version
In this emergency episode Shabbir, Sven, and DSCSA expert Mark Karhoff talk about the new decision from the Fourth Circuit court of appeals in the Lanham Act case around Alternative Funding Programs, Gilead Sciences vs Meritain Health et al.
39 min - Imitation Nation Podcast No 34 Interview with Mark Karhoff
In this emergency episode Shabbir, Sven, and DSCSA expert Mark Karhoff talk about the new decision from the Fourth Circuit court of appeals in the Lanham Act case around Alternative Funding Programs, Gilead Sciences vs Meritain Health et al.
39 min
About Imitation Nation
From the publisher's feed
Imitation Nation is a podcast that covers all things counterfeit, hosted by Shabbir Imber Safdar and Sven Bergmann.