Authorities say sale of counterfeit sneakers can lead to terrorist financing

Sneaker buying frenzy has also led to a counterfeiting explosion.

ByABC News
September 7, 2017, 9:04 PM

— -- Some of the hottest items for sale today are limited edition or rare sneakers -- footwear that inspire a cult-like following and can fetch prices running into the thousands of dollars -- but federal customs officials say there is a darker side to the trend, as counterfeiters with potential ties to transnational crime and even terrorism have stepped in to feed the demand.

Genuine Yeezys retail for around $200 a pair, but they are so rare and sell out so fast that sneaker speculators will sell them at massive mark-ups through stores like the Magnolia Park in Burbank, California, where a pair of Yeezys can go for as high as $1,500.

“I’ve seen kids come in here with Excel spreadsheets, showing their entire collection and what they’re selling,” said Magnolia Park founder Mike Guerra. “It’s like the stock market. One day it’s worth $500, the next day its $1,000, and just all comes down to how many there are available.”

Thanks in part to this demand, sneakers are one of the most counterfeited commodities coming into the U.S. according to Edward Fox, the Customs and Border Protection's acting port director of the Port of New York and New Jersey in Newark. Mostly in China, giant factories churn out thousands of counterfeits that bear only subtle differences to the genuine models, like minor discrepancies in the threading, color variation, logo placement and even the sole.

Some fakes are so good many consumers are turning to unofficial authenticators online, such as Yeezy Busta, who calls out the fakes daily to his more than half a million followers.

“You walk around L.A. and you’ll see at least 10 people wearing these,” he said, referring to Yeezy sneakers. “Probably eight or nine of them will be fake.”

Yeezy Busta, an unofficial sneaker authenticator who wears a mask to hide his identity, says the pair of sneakers on the left is fake and the pair on the right is real.
Yeezy Busta, an unofficial sneaker authenticator who wears a mask to hide his identity, says the pair of sneakers on the left is fake and the pair on the right is real.

Yeezy Busta, who said he’s a 19-year-old medical student from Los Angeles but wears a mask to hide his identity because he’s afraid of being sued, offers a Yeezy verification service. For $10, followers can email him photos of their shoes for him to review. Some people know their Yeezys are fake, but don’t care.

There are also plenty of how-to tutorials on YouTube explaining how to check if sneakers are genuine and some buyers knowingly go for fakes to save money.

But authorities say purchasing counterfeit goods is not a victimless crime and can fuel illegal enterprises involved in potentially violent activities.

“Those dollars are not going to some legitimate business those dollars are going to support drug trafficking organizations, organized crime and in some cases terrorist organizations,” said Fox.

Officials say terrorists who attacked the French magazine Charlie Hebdo in 2015 financed their weapons partly by selling fake Nike sneakers. U.S. authorities have amped up their efforts in response, seizing more counterfeit goods than ever before.

“Nightline” was embedded with the Los Angeles Police Department as they went on a raid in Inglewood, California. Undercover agents working for Nike had been surveilling a store for months where they said they had bought counterfeit sneakers before and now were bringing in the LAPD in hopes of making arrests.

“Most people, they want to wear items that are known and they don’t really care that they’re counterfeit,” said Det. Ricky Ishitani.

When the LAPD raided the store, the owner was nowhere to be found but they did arrest a female store clerk for selling counterfeit goods.

Police said the clerk cooperated and has not been charged. The store’s owner, an alleged supplier, was later arrested, but has not been charged. Police said the storeroom was packed with fake sneakers and they will pursue charges.

“It was a lot. Hundreds,” Ishitani said. “The whole back end was covered with sneakers.”

It’s not just the West Coast. “Nightline” was there as CBP officers combed through boxes of shipments in New Jersey, rifling through packages to see if they contained counterfeit goods.

CBP partners with other agencies, including the FBI and the DEA, to share intelligence on counterfeit shipments and try to prevent fakes from ever making it to the U.S. in the first place.

“We see counterfeit goods coming from all over the world,” Fox said. “Obviously China is a large manufacturer and so the possibility of there being some volatile merchandise coming out of China is fairly high.”

For the sellers of counterfeit goods, it’s a lucrative game.

“An average distributor ... makes anywhere from $80 to $100,000 a month,” Ishitani said. “So that's over $1 million a year. If you’re that guy who sells at a corner of a parking lot ... you're making about $4,000 to $5,000 a month just selling Yeezy shoes.”

And authorities say the punishments if caught are more lenient than for other crimes, such as narcotics trafficking. But it’s where the money is going that worries them the most.

“One thing good about criminals is they take great notes on where the money goes to,” Ishitani said. “So we'll look at [documents], we'll see evidence of Moneygram.”

Last year, the CBP said they seized over $32 million worth of counterfeit goods.

“When you pick up something that is an illegitimate shipment sometimes you'll see the weight it is different,” Fox said. “After you've done this 5,000 times you started to feel for what legitimate Nikes might feel like.”

ABC News' Nick Watt contributed to this report