Two U.S. brother’s, Andrew and Allen Chiu, we’re blocked from making purchases from Nordstrom.com after excessive chargeback claims and causing the department store significant losses in friendly fraud. The two then moved on to a scam in which they illegitimately earned commission payouts, but they have since been arrested and have pled guilty on charges of wire fraud.
Andrew and Allen Chiu, of California and Texas, were banned from placing orders at Nordstrom.com back in 2008 because of excessive chargebacks and claims for refunds on orders they claimed were never delivered. Abusing the chargeback and transaction resolution programs of issuing banks the Chiu brothers caused significant losses for Nordstrom while likely reselling the ill-gotten goods for personal financial gain. Despite Nordstrom blocking the Chiu brothers from doing future business, they continued to try.
The Chiu brothers later joined FatWallet Inc., a membership shopping community that provides rewards and incentives for shopping with select merchants, one of which was Nordstrom. Starting in January 2010 the Chiu brothers discovered and exploited a glitch in the Nordstrom ordering system. Either of the Chiu brothers could initiate an order through Nordstrom.com but the order would later be blocked because of their extensive and exorbitant negative history with the department store’s online site. Although the orders would not be approved and no merchandise would be shipped, the error in Nordstrom’s system allowed commission payments to go to FatWallet from these transactions, and a portion of this payout would then trickle down to the Chiu brothers. Between January 2010 and October 2011, when the scheme was finally thwarted, Andrew and Allen Chiu placed $23 million dollars in orders, Nordstrom paid $1.4 million in rebates and commissions to FatWallet, and over $650,000 went directly to the Chiu brothers.
The Chiu brothers were arrested and charged with wire fraud to which they plead guilty in the U.S. District Court of Seattle in early April. They now await their sentencing, scheduled for July 13, facing a recommended sentence of 24 to 30 months behind bars.
For more information: Brothers Who Defrauded Nordstrom with Online Reward Scheme Plead Guilty to Wire Fraud