Philadelphia Union Pension Sues Amazon for Allegedly Lying About COVID Expansion

The Asbestos Workers Philadelphia Welfare and Pension Fund has filed a lawsuit against Amazon.com, alleging that the retail giant made false and misleading statements about the expansion of its e-commerce infrastructure during the COVID-19 pandemic.

According to the complaint, which was filed in the U.S. District Court for the Western District of Washington, before the outbreak of the pandemic, Amazon invested “significant capital” to aggressively expand its infrastructure and fulfillment networks. This was a key priority for the company, which was looking to increase its ability to provide its e-commerce customers with shortened delivery times, including same-day delivery.

For more stories like this, sign up for the CIO Alert newsletter. 

When the pandemic hit in early 2020 and consumer demand for Amazon’s products skyrocketed, Amazon continued expanding its infrastructure and fulfillment network capacity to meet demand, the lawsuit says. It notes that between the end of 2019 and the end of 2021, Amazon more than doubled its warehouse, distribution and data center space, to 387.1 million square feet from 192 million square feet.

According to the lawsuit, Amazon “repeatedly and consistently told investors that the company’s investments in expanding infrastructure and fulfillment network capacity were sound and appropriate decisions for the long term.” However, the suit alleges these statements were false. “In reality,” says the lawsuit, “the defendants knew or recklessly disregarded that the company’s infrastructure and fulfillment network investments substantially outpaced demand, and that those investments were a massive, self-imposed, undue drain on Amazon’s financial condition.”

The lawsuit also alleges that, contrary to Amazon’s public statements, by July 2021 the company had already implemented cutbacks to its fulfillment capacity without disclosing it to investors. The alleged “misrepresentations and omissions” caused Amazon’s common stock to trade at artificially inflated prices, the suit alleges. It claims the “truth emerged” on April 28 of this year when Amazon reported its first net quarterly loss since 2015.

“After months of falsely representing that Amazon’s expansion of its e-commerce fulfillment network and infrastructure was necessary and appropriate to meet both short-term and long-term customer demand, defendants disclosed that day that Amazon was ‘no longer chasing physical or staffing capacity,’” says the complaint. The lawsuit says that Amazon reported $6 billion of incremental costs, including $2 billion due to overcapacity in its fulfillment and transportation network. It says that when this news was released, Amazon’s stock price tumbled more than 14%.

The plaintiffs did not say in the complaint how much they are seeking in restitution. Amazon declined to comment on the lawsuit.

No Plan Safe From ERISA Lawsuits, Chamber of Commerce Warns

Lawsuit Accuses Caesars, Russell Investment of Gambling with 401(k) Plan

Tags: Amazon.com, Asbestos Workers Philadelphia Welfare and Pension Fund, COVID-19, Equities, Lawsuits, Pandemic

The Commodity Futures Trading Commission has charged a South African commodity pool operator and its CEO with allegedly running a fraudulent multilevel marketing scheme that took in over $1.7 billion worth of bitcoin from at least 23,000 investors. It is the largest fraudulent scheme involving bitcoin charged in any CFTC case, according to the derivatives markets regulator.

The CFTC charged Cornelius Johannes Steynberg of South Africa and the company he ran, Mirror Trading International Proprietary Limited, with fraud and registration violations. The charges allege Steynberg created and operated a global foreign currency commodity pool through Mirror Trading International that only accepted bitcoin, and that he and the company misappropriated the more than 29,000 bitcoin they accepted from pool participants.

For more stories like this, sign up for the CIO Alert newsletter. 

According to the CFTC’s complaint, the commodity pool, which was controlled by the company and Steynberg, purportedly traded off-exchange, retail foreign currency on a leveraged, margined and/or financed basis. This was conducted with participants who were not eligible contract participants through what Steynberg claimed was a proprietary software program, or bot.

The complaint alleges Steynberg made fraudulent omissions of material facts in solicitations to actual and prospective pool participants. These omissions allegedly include failing to disclose that he and his company misappropriated pool funds; that there was no trading “bot” trading on behalf of participants; that no profitable trading took place on behalf of participants; that the account statements provided to participants were actually simulated trades from “demo” accounts; that purported “returns” paid to some participants were in fact principal deposits from other participants; and that online broker Trade300, where Steynberg purportedly traded the participants’ bitcoin, was a fake entity he created.

The complaint says that of the more than 29,000 bitcoin Steynberg and his company accepted from participants, they only deposited fewer than 1,900 bitcoin and lost 566.6 bitcoin trading unprofitably.

“Defendants never traded profitably, never earned any profits trading, and misappropriated essentially all of the at least 29,421 Bitcoin they accepted from participants,” the complaint states.

The CFTC is seeking full restitution to defrauded investors, disgorgement of ill-gotten gains, civil monetary penalties, permanent registration and trading bans and a permanent injunction against future violations of the Commodity Exchange Act and CFTC Regulations. Sternberg, who was a fugitive from South African law enforcement, was recently detained in Brazil on an Interpol arrest warrant.