CNC Fraud

A fool and his money soon part ways. Buyer beware!

If you have the money to spend $200K on a machine then you have too much money to risk "DMCA", "unauthorized computer access" and "software copyright violation" charges. Have an attorney look into this matter. If the attorney can find supporting laws or get a judicial order then you still have a tough decision. If the attorney can't get one of these then the answer is easy, it is no.

Disclaimer: I have no authority or qualifications to give advise on these matters.

Not knowing all the particulars, but for a waterjet, with the intensifier, that's not too far out of the ordinary, it just sounds like it was the representive that bilked the customers out of the money, and not the monufactures. Still, I wonder how they bought it, sight unseen? That is the problem.

This is a legal matter, and not an Engineering one. GA

"Can anyone hack into these to remove the software lock "

Yes, if they have the software and the skill set required.

"I heard this is illegal in the USA to ship a CNC or computer with a lock in the software that will render it unusable unless final payments are received."

No, it is not illegal and is often used by the manufacturer and/or distributor to protect their business interest.

Because the machines are from China it will most likely require an international fair trade court hearing and negotiations to solve the situation legally and fairly.

The owner's legal department should be able to address the issues and negotiate a solution but it will not be cheap.

I remember being told; "The savings realized from a cheap purchase is soon overshadowed by the cost of poor quality and lack of technical support."

It makes no sense that the Chinese company shipped the machines without any payment?

There is something else going on here!

Not necessarily, GPM Technologies, located in Schaumburg, IL, they where at one time the largest distribtor of Shoda CNC Routers in the northern hemisphere. Shoda, which is one of the best, heavy duty, quantity CNC Routers.

GPM did it to Shoda. And GPM Technologies is no more.

https://ecf.ksd.uscourts.gov/cgi-bin/show_public_doc?2006cv2505-18

The Dealer is a criminal. Period. When sued in court he doesn't even bother to show up. Has millions in judgments against him. Doesn't care. The shell corp he set up has no money. He tricked the Chinese company in bringing over machinery for a Fab Tech show and them when he sells them, he would pay them which he never did. We got the Chinese company to meet with all five customers at Fab Tech a year later but now they won't even answer emails.

When did this "SWINDLE" happen? A year ago?

Over a year ago. Not looking too good so far.

What does your insurance company say?

What are the other parties doing?

If the Chinese company isn't pushing for their CNC back then why don't they send you the unlock codes and close the matter? Surely this is better for them than potential bad publicity? They are not going to lose or gain any money either way. Have you all tried this approach?

Are you just leaving messages or waiting until you have a person on the other end?

The Chinese company built the entire machine. Cheapest one was $110,000.00. The most expensive one was over $200,000.00 They are very large. We ganged up on them at Fabtech and said we know this is not their fault but they will be blamed and they will never be able to sell in this country again if they don't give up the code. They will not do it. They were offered great publicity to include a new honest distributer if they gave up the code. They will not do it. They want their money! But the customers paid in full to the crooked dealer!

I would get together with the other companies defrauded and offer the OEM $20,000.00 each for the unlock code.

If they refuse, then look at retrofitting the machine with a new controller.

What brand of servo's and controllers are in the cabinet? Siemens?

OK, it sounds like the supplier doesn't want to give the code but what is their stance on the CNC? Are they thinking you are going to pay another $200k just for the code or are they expecting you to return the machine because they believe they still own it? Are they considering legal action? Not sure of Chinese law but have they been reimbursed by their insurance company and this is all sour grapes?

Important questions that need answers to before proceeding with modifying the CNC - legally who owns it.

Also, what does your insurance company say?

Unfortunately from a company legal point of view replacing the controller may be a safer alternative even if you own the equipment.

Over a year ago and the OEM hasn't insisted on the machinery to be returned or dismantled and returned to a warehouse of their choosing.

If you truly own the machinery and have a receipt then I would retrofit someone else's controller (probably cost about $50K) onto the machine and have it pumping out parts.

There aren't too many companies I know of that can sit on a $200,000.00 machine and not be utilizing it, if you can then go out and buy another machine and tell the Chinese company to come get their machine. If they have to incur all moving and shipping costs to remove a machine from an operating shop, or 5, they may offer you a deal to pay them a few $$ to have the software unlocked?

Is there litigation against the Chinese company?

Does the Chinese company have litigation against the "5" companies?

Asking someone to "HACK" around someone else's software security is a bigger problem than doing a retrofit. If you successfully "HACK" their software, you are guilty of software piracy (and they will find out) then the Chinese company can possibly get a lot more than the $200K back because they will have their lawyers and the lawyers of any other company "DAMAGED" by your hack at your doorstep! Drooling all over their lawsuits!

Critical for this situation is the exact relation of the dealer with each party in other words the exact deal papers and conditions signed. One or both of you has done a serious mistake somewhere in the trust circle and he will bare most of the cost, either you by paying undelivered goods or manufacturer by sending un-payed goods. I'm sure there will be a lot more to it from interpol, things may not be exactly as they seem. Now hacking is not an option for complicated software that WILL require support from manufacturer, not just some password, and would not be ethical either unless it's proven that chineese did not take all proper actions to secure their payment and thus should not have sent the equipment. Good luck. S.M.

This is like going to a health food store and asking advice on acute renal failure.

This is just a suggestion, but you might want to talk to an attorney.

Of course, it is April Fools' day.

I been falling for that all day..... And I'm started to get mad.

Many lessons to be learned here.

Due diligence, on the part of the US customers of their distributor seems to be non-existent. "Sure they will build you a great machine, but they want the whole sum up front. Trust me, I do this all the time".

Same with the Chinese machine builder. "Trust me, the check's in the mail, now ship those machines".

Import/export agents are worth their fees.

Track records and reputations in the industry should be well known, before purchase.

I never had good experience with importing anything from China, directly.

You are basically in possession of stolen goods at this point...You need written authorization from the legal owner of the machine in a legal document stating whether they want the machine back or not....only then can you proceed....You need a lawyer to proceed with legally requiring the owner to repossess the machine within a certain time period or relinquish all claims of ownership, that way you can take legal ownership of the machine and proceed with making it work....Then having legal ownership of the machine you are not bound by any contract to use their software...imo...but hacking their software and using it as an unlicensed entity may violate intellectual property rights, so I would find a new program to control the machine...one that you can use legally and update as needed...

Possession if stolen goods implies the companies in possession are guilty of a criminal act. The machines seem to have been delivered originally with the knowledge and agreement from all parties. That should make the dispute of possession strictly civil, IMHnonlegalO.

The agent who sold them the machine is guilty of a criminal act....they are also victims...the fact remains the machine is in legal limbo....and an agent could show up with another client willing to buy the machine holding a court order giving them the right...If they demand payment for storage they could possibly recoup their losses over time and claim ownership of the machine for non-payment of storage fee's and late fee penalties(you know how those late fee's can add up), and finally take legal possession, or at least get a chunk of their money back....I think this is more of a political issue now that calls for a mediator who works with businesses in China...and a lawyer representing your interests....

Might be able to get a lead here...

http://www.gdblaw.com/images/doc/businessusa_eng.pdf

The agent certainly seems to behaving like a criminal. Unfortunately, depending on how slick the agent is, he may be able to relegate actions against him to civil.

The OP's additional description of the agent as having millions in decisions against him, and not showing up for court, do suggest he has done this 'successfully' more than a couple times.

It is frustrating to see someone working the system in a bad way. Depending on how badly swindled, I'm sure the temptation to step outside the law for a little retribution is considered serious consideration, even among some of the most upstanding individuals.

You should be talking to lawyers, not Engineers!

Just an update, buyers contacted dealer mostly through the internet. That landed this in Internet Fraud territory. The Internet Fraud department stated they are not interested in anything under $10,000,000 as they don't have the time. The fraudulent dealer came highly recommended by two fortune 500 companies. Everybody got scammed. I have no idea if the Chinese have rights to reposes the machinery.

$10,000,000 !!

Must be a lot of fraud going on...... or the Internet Fraud department consists of only one gum shoe detective.

Ultimately the legal avenue will be the best, but meanwhile the equipment is unable to be used and that costs money.

A solution that sometimes works is to simply backdate the computer clock so that it never reaches the shut off date. This can be effective if the programmer was a bit lazy and just used the clock as the 30 day timer, but if the program just counts 30 day time periods then that won't work.

Other programs such as this insert a date in the software itself which may extend the use time.

So far, your company is in deep s...t, and the problem you have ahead seems to have no solution the way you have dealt with it so far. Chinese culture is absolutely different to ours and if we expect them to act as "non chinese" it is us, and not them who are wrong! The way you or your company made the complaint may have offended them ... and these guys can be quite stubborn! You spent 200K in this machine. If I where you, I would spend some bucks in a ticket to China, hire a translator, learn some "good chinese manners" and visit the manager of the company to see how to solve the problem. No doubt you will return with the key to the program.

I would not travel to China: you might end up in jail till the manufaturer of the machine has his money. From the Chinese standpoint these machines are stolen.

Getting paranoid only makes things worst! Lol

I still would hire an attorney that specializes in international trade and start there.

This may be quite a bit of the problem. If the manufacturer was suddenly approached by a group of people demanding things saying he did wrong, that causes the manufacturer to lose face. I have dealt with China in the past and the only way to move past some of the problems was to make it a group effort and not placing blame. To you, you have 200K just sitting. To them, they have never gotten paid. They 'probably' lost money the money too.

It seems that this has grown to something beyond what this outstanding group of engineers' specialty is. I agree with everyone else in their advice of finding a lawyer. And reading up on international law some. It seems you are way past the point of a cup of tea or a KTV to smooth things over.

If I was supposed to buy such high value machine, I will prefer to buy from local mfr., there are many in U.S. If I would have bought such machine from foreign source I would first visit the mfr. check their credentials etc. then only I will buy it. How come you became victim to fraud?. Was it because of price? You tried to save few dollars but lost all the huge money.

I don't understand the drama here. This should be a simple insurance claim that reimburses the manufacturing company to release the software. What if this CNC machine fell off the container ship in transit. The shipping company would call on their insurance to reimburse the owner(s) of the lost container contents.

making a claim of Lost at sea, or damage during transport is different from theft by fraud.

Yes, they are different sub categories of property or wealth losses that good business practices should anticipate can happen.

Make the bean counters work for their beans!

well, the way its unfolding, it looks that the bean counters initially tried to save a buck.

Considering the information, Would one think that a policy was taken out?

No, I don't believe a separate rider was taken out from how this thread has started and continued. The fault here lies in the poor business practices and a fraudulent entity, not the engineering. All of the bean counters at the OP's firm should be summarily fired if there is no insurance rider to cover exposure to fraudulent activity outside of the firm. Mitigating corporate risks is their primary function.

Agreed.

If accounting is based on long term profitability and not short term profitability.

Also a rider for this would be small considering the money involved.

And any more discussion on this or the possibilities is futile.

Well this has been very interesting. over 36 comments! I'm not the owner of one of these five machines. Just trying to help the 5 companies who purchased these from the criminal importer who went to China and got the export rights. I also can remove all of the CNC controls and substitute any number of USA controls on the system but this would be throwing good money after bad! As far as speaking and understanding Chinese, my brother is fluent in two dialects and has lived there for 4 years. We know the culture. Absolutely no reason for any attorney. The scam Importer has already lost dozens of judgments against him and has no money. I'm guessing the Chinese firm has lost over $500,000 them selves. Thanks to everyone for all of the comments. JZ

I suspect that in the eyes of international law, the Chinese fabricator is still the owner of these machines. I wonder what, if any, import/export tariffs have been paid by this export company. I suspect these fees were paid or the machines would be in a customs holding warehouse instead.

Just to play devils advocate for the importer, it is possible their assets have been rightly or wrongly frozen by another court that will ultimately release some or all of the funds to where they were originally going.

Regardless of the complicated legalities, trying to bypass any of the manufacturers methods of guaranteeing payment seems morally wrong to me

kinda interesting.....

you may be right, but, if the middle man is a representative of the OEM... now what.

Being a representative, didn't technically the customer already paid for the machine by paying the representative?

I posted a link that had similar account Between Japan's Shoda Industries of Japan and Shoda's North American Representative GPM Technologies.

There is more to this, GPM just crumbled (A lot had to do with family issues with the second generation being worked into the company).

FYI The people who purchased these five machines paid 100% in full to the dealer.

If you want to help them tell them to get an attorney. After spending nearly 1/4 million dollars each it seems stupid for them to try to cultivate free advice now.

That is, unless they are looking for a bigger shovel to dig a bigger hole for themselves.

You're f****d.

retrofit the cnc controller with a new one it will cost you around 20,000us$ they cant lock the pump (which is most expensive part) .

its the the job of left hand to retrofit the 2 axis machine.

i offer you free support ,till your machine run.

These are 5 axis machines. Pumps are fine as they were made in the USA. jz

send me the controller details .

I don't know how to attach photo's JZ

I recommend you click on Sohail0110 name and then select to send him a direct message with your e-mail address. This way you two can freely exchange as much data in private as your e-mail providers can handle.

I once had a similar issue. I contacted my uncle Guido from da Bronix. Shortly there after a tech showed up, solved the issue and refunded my investment, which I gave to Guido. Unfortunately Guido passed away a few years back.

You can get more with a kind word and a gun, than a kind word alone.... attributed to Al Capone.

You might be on to an idea here. If the purchasers could get their hands on the fraudulent dealer and strap him down to the bed of one of their machines, the Chinese manufacturer might be more than willing to release the necessary codes to enable them to cut him into little pieces

I already suggested this!

"You can get more with a kind word and a gun, than a kind word alone.... "

...hmm, yeah, like a brandishing charge.

This crooked dealer is still at large?

Crikey, if he ripped off 5 individuals here at 200K a head he'd be dead, the money would be retrieved, Chinese supplier paid and the codes installed with lots of KTV in between.

Police and courts? Last resort.

Having worked for Boeing Source Control I can state that a proper audit of the supplying company with investigation of their business practice/products and even credit rating is necessary prior to purchasing of any equipment or service.

When I had my business, any major purchase, I check the duns and Bradstreet number of the company, like I also had my DUNS number available.

These 5 companies are in possession of equipment that they paid for. They have paperwork showing that they paid for the equipment that they received and the software keys that they did not receive. I'm not a lawyer but I would think that they legally own the machines. Because of the issues discussed there would be the knowledge that legal action to recover the machines is a risk but the brief amount of information posted suggests it is a low risk.

Posting #6 indicates that this issue is over a year old and that the manufacturer of the machine is non responsive to contact attempts. It might be time to give up on getting the codes.

Talk to lawyers but it would appear that it is time to consider spending $20K "maintenance and repair" (posting# 41) on the machines that you own. Get some good use out of the machines. The machines were paid for and there is no storage agreement in place. At worst case you would have to some day reinstall the OEM controller and ebay the used controller. Take pictures of the OEM installation and keep the OEM controller and all purchase paperwork safe. Instead of having $200K not working for you have $220K doing work.

1.Most affected party is Chinese mfr. he did not get payment for 5 machines.

2.How come he shipped all 5 machines without any payment?.

3.There seems to be joint venture between mfr and dealer.

4.Complaint should be launched with concerned authorities.

5. Only international court in Copenhagen take legal action.

Thanks for this mail: I didn't knew that there is a court somewhere in the world to deal with international trade issues.