ERAI Blog

OEM and CM Buyers Targeted in US Based Bait-And-Switch Scheme

Kristal Snider
ERAI, Inc.

This message is a warning to any organization involved in the purchase of electronic components.

A man by the name of Nick Martin has created, and/or is affiliated with, numerous companies and websites that fraudulently advertise to have hundreds of thousands of line items of inventory in stock or on consignment when, in fact, the parts are not in stock and consignment agreements appear highly unlikely. It is more likely that, upon receipt of a request for quote, Martin is sourcing untraceable product in the open market, including the Chinese open market. Martin and his co-conspirators require payment in advance but have reportedly either failed to ship the ordered product and failed to refund monies paid in advance, have shipped the incorrect quantity, or have shipped nonconforming parts.

ERAI became aware of Nick Martin’s unethical and/or fraudulent conduct when two different organizations, an Independent Distributor and an OEM, simultaneously filed complaints with ERAI in January 2019 against Hooper Electronics for wire fraud. Both organizations described searching for parts using the Internet trading portal OEMS Trade (www.oemstrade.com). Among the distributors advertising the parts they needed as in stock was Allen Components. When a request for quote was sent, Allen Components’ responses were made by Hooper Electronics. Payments were wire transferred in advance to Hooper Electronics but neither party received the parts they ordered. After being reported by ERAI for wire fraud, the website for Hooper (www.hooperelectronics.com) was taken down. The website for Allen Components remains active.

When investigating Hooper Electronics and Allen Components, ERAI identified what we believe to be additional shell companies and/or websites belonging to or affiliated with Nick Martin that were established to generate leads and attract Original Equipment Manufacturers (OEMs) and Contract Manufacturers (CMs) in search of hard to find parts (i.e. obsolete parts or allocated parts):

Allen Components – www.allencomponents.com
AW Components – www.awcomponents.com
CDM Distributors - www.cdmdistributors.com
DC Stock – www.dc-stock.com
Hooper Electronics – www.hooperelectronics.com
Keen Distributors – www.keendistributors.com
TTM Components - www.ttmcomponents.com
WCA Electronics – www.wcaelectronics.com

Owning or operating lead generation websites is not in and of itself unethical; however, in the case of Nick Martin and his co-conspirators, it appears to be a case of bait and switch. By passing orders off to a third party, as was the case with Allen Components passing leads to Hooper Electronics, the reputation of Allen was protected when the deals fell through. As was previously noted, Allen advertised product in stock but payments in the aforementioned complaints were made to Hooper, not to Allen. Allen, seemingly once removed, was allowed to continue to post fraudulent in stock inventory offerings on OEMS Trade despite being directly involved in the fraudulent activity.

Recently, ERAI became aware Nick Martin has created and/or is affiliated with the following new companies/websites:

Sere Components – www.serecomponents.com
Comstock Components – www.comstockcomponents.com
Note: The websites for Sere Components and Comstock are identical
Bennet Electronics – www.bennetelectronics.com

Bennet Electronics and, once again, Allen Components serve as the bait and the deal is then switched over to Sere Components.

As with Hooper Electronics, Sere took payment in advance for parts that were represented as in stock, the goods were never delivered, and the OEMs have been unable to obtain a refund of their monies which were wire transferred in advance as required by Sere.

RISK INDICATORS

If wire transfer payment in advance is the only form of payment a supplier will accept, it should raise a red flag.

Nick Martin and his co-conspirators do not use their real names, they use aliases to conceal their true identity.

Do not buy parts from unknown companies or people. There are many independent distributors who are established, reputable and transparent. Allow your trusted and verified independent distributor partners to source open market product on your behalf. They have great visibility into the global supply chain and can help you navigate risk. If your verified suppliers cannot locate the parts you need but some unknown third party found via Google, or OEMSTrade, or other such sites can, you should consider that a significant risk indicator and should not wire funds in advance.

Verify the address of your supplier.

The addresses appearing on the websites belonging to the companies identified herein are fraudulent. The individuals operating these organizations are operating from unknown locations. They are known to use the shipping and receiving services of providers such as the UPS Store or Mailboxes Etc. Addresses belonging to these types of service providers can be easily identified by performing a Google search. A supplier identifying only a UPS Store, Mailboxes Etc., or virtual office address should be considered high risk.

By concealing their true identities via the use of aliases and failing to provide a true and correct operating address, the perpetrators have made it more challenging for a victim or dissatisfied customer to recover a loss.

Verify the supplier is licensed and/or registered in the state they claim to be located.

The companies operated by Nick Martin are not registered with the California Secretary of State. Unregistered businesses should be considered high risk.

Verify the accuracy and validity of records.

Nick Martin is known to have, on at least one occasion, provided an OEM with a falsified W-9. Obtain a photo ID of the individual identified on a W-9 or other tax documents.

Verify the supplier’s website registration.

High risk suppliers may have a website that was newly registered or that is registered in such a way to conceal the identity of the site owner.

Use a secured method of payment.

Suppliers that refuse payment other than wire transfer in advance should be considered high risk. Select a form of payment that will protect both the buyer and seller. Organizations that require advance payment may be using your money to purchase parts from high risk sources or may use your money for personal use or to repay other disgruntled customers that are starting to make threats such as contacting the police or publishing negative reports with ERAI or other reporting platforms.

If you have done business with or have information about any of the above-named entities, or if you need assistance in developing a supplier selection process or identifying reputable independent distributors, please contact ksnider@erai.com.