SLO company says it lost $500,000 in COVID-19 face mask scam. Now it’s suing
A San Luis Obispo company says it fell victim to a scam in the early days of the COVID-19 pandemic when it ordered nearly $1 million in protective face masks, paid a 50% deposit, and waited in vain for the Chinese supplier to come through.
In a lawsuit filed Tuesday in San Luis Obispo Superior Court, attorneys for Bandana Trading, Inc., list seven individuals and four companies it says were involved in the “conspiracy” to defraud the business, which claims it ultimately lost about $500,000 over the deal.
Most of the people listed as defendants in the complaint reside in Santa Clara County, the lawsuit says, but their related businesses, such as San Luis Obispo-based Solido Partners and Milpitas-based Clarke Financial Holdings, do business in San Luis Obispo County.
“(The defendants) hold themselves out as global suppliers of KN95 masks and surgical masks which are and have been in short supply in the United States and which are, and continue to be, necessary for the protection of first responders and health care providers during the worldwide COVID-19 pandemic,” the lawsuit says.
The complaint says that, in March, two of the defendants “convinced and promised” Bandana Trading, Inc., that they had access to hundreds of thousands of protective KN95 masks and three-layer surgical masks from a Chinese source and could sell them to Bandana Trading at a deal for distribution across the U.S.
One of the defendants claimed that his cousin manufactured the masks in China, the lawsuit says.
The two people allegedly directed Michael Kyle, CEO of Bandana Trading, to Clarke Holdings, a supplier in California, to facilitate the import and sale of the inventory.
In early April, Kyle made the order and was given assurances that the quality would meet the business’ requirements, the lawsuit states.
Clarke Holdings allegedly offered to supply Bandana Trading with 400,000 KN95 masks at $2.25 per unit, as well as 100,000 three-layer surgical masks for 47 cents per unit, for a total cost of $947,900.
But the company required a 50% deposit, which was paid via wire transfer, the lawsuit says.
The masks were supposed to arrive no later than April 16 or the order would be void, the complaint says. The lawsuit says the face coverings never showed and no reimbursement was made.
Lawsuits represent just one side of the story. As of midday Thursday, Roy Ogden, attorney for Bandana Trading, Inc., had not responded to a request for comment.
None of the defendants had yet filed responses in court or had attorneys listed in court records Thursday.
A case management conference has been scheduled for September.
