A prominent Amazon consultant has avoided jail time for his involvement in an elaborate scheme to bribe company employees to give his clients an upper hand on the e-retailer’s sprawling online marketplace.
Ephraim “Ed” Rosenberg in March plead guilty to a criminal charge, stemming from a Sept. 2020 indictment that charged six people with conspiring to pay Amazon employees bribes in exchange for confidential information that would benefit third-party merchants selling goods on the company’s marketplace.
Rosenberg was sentenced Friday in a federal court to two years of probation, and 12 months of house arrest. He was also ordered to pay a $100,000 fine.
“Mr. Rosenberg’s illegal actions were harmful to the sellers who work hard every day to build a thriving business on Amazon, and today he was held accountable for his crimes,” Amazon spokesperson Mira Dix said in a statement. “When we uncovered the suspicious behavior related to this case in 2018, we reported it to the FBI and actively supported the ensuing investigation.”
Rosenberg, 48, is a well-known figure in the world of Amazon third-party sellers. He runs a consultancy business that advises entrepreneurs on how to sell products on the online marketplace, and navigate unforeseen issues with their accounts. Rosenberg’s Facebook group for sellers, ASGTG, has over 70,000 members, and he hosts a popular conference for sellers each year in his hometown of Brooklyn.
The case provides an unfiltered glimpse into the cottage industry of consultants and brokers that has flourished alongside the growth of Amazon’s third-party marketplace. Since its launch in 2000, the marketplace has become a lucrative and competitive platform for millions of sellers to market their wares. From May 2019 to May 2020, U.S. small and medium businesses selling on the marketplace had an average of over $160,000 in sales, according to a report issued by Amazon.
While the marketplace has helped Amazon haul in tens of billions of dollars in sales, it’s also become a notorious host to counterfeit, unsafe and expired goods. Behind the scenes, scammers have for years resorted to illicit tactics to squash competitors, artificially boost their listings or bypass Amazon’s marketplace rules.
The case isn’t the first time Amazon has dealt with issues of company employees leaking confidential information or manipulating the site in exchange for payments. In 2018, the company investigated claims that employees, primarily based in China, who received payments worth $80 to more than $2,000, in exchange for access to internal data, The Wall Street Journal reported.
Amazon has said it invests hundreds of millions of dollars per year to ensure products are safe and compliant. The provision of internal data to sellers by employees violates Amazon’s seller policies and code of conduct.
Rosenberg’s punishment is far less severe than what other defendants have faced. A former Amazon employee was sentenced last year to 10 months in prison, while a consultant who also sold products on Amazon is serving 20 months in prison.
Prosecutors recommended a lesser sentence for Rosenberg because there was no evidence he initiated attacks on competitors’ product listings like some of his conspirators, who allegedly lodged false complaints to Amazon, and bought fake negative reviews for rivals’ products. Other defendants also pleaded guilty to tax evasion charges in addition to the bribery scheme.
Between July 2017 and Sept. 2020, Rosenberg paid bribes directly and indirectly to Amazon employees in order to steal confidential data, as well as gain access to internal systems. In one case, Rosenberg made 33 different PayPal payments worth $18,650 to an Amazon employee in Seattle in exchange for confidential information about third-party seller accounts.
Most of his payments were for account “annotations,” or an internal Amazon employee log of infractions on a sellers’ account, which Rosenberg and another defendant, Joe Nilsen, covertly referred to as “fruit” in email correspondence.
“Sellers who had been suspended from selling on Amazon could use this internal information to see exactly what Amazon had figured out about the sellers’ infractions and to tailor their appeals for reinstatement accordingly,” prosecutors alleged.
Nilsen bragged to Rosenberg over email about the services he had gained access to by bribing employees.
“I am not trying to make it seem like we have all the abilities in the world, but even though it took some time and some face to face meetings, we obtained abilities that still blow my mind,” Nilsen wrote in a Jan. 2018 email to Rosenberg, referring to his internal contacts as “high up ‘flick the switch’ type guys.”
“I don’t want to have a little menu floating around but if you are in need of anything, just run it by me and I will let you know,” Nilsen continued.
Previously unsealed court documents said Rosenberg allegedly sent a “veiled threat” to an Amazon employee at the company’s Seattle headquarters as part of the bribery scheme, Bloomberg reported. The documents also detailed the defendants’ elaborate efforts to dodge detection by authorities, including allegedly stuffing a llama-shaped ottoman with cash believed to be bribes, according to Bloomberg.
Rosenberg’s guilty plea in March marked a reversal of his position on the case. He repeatedly denied prosecutors’ allegations and claimed in LinkedIn messages to CNBC he was being framed, as well as in posts on Reddit forums and Facebook groups. He later admitted he made false statements about the case and admitted to bribing Amazon employees in a public apology posted online.
An attorney for Rosenberg, Jacob Laufer, wrote in a sentencing memo that while Rosenberg’s conduct was illegal, it was a symptom of a marketplace ruthlessly governed by Amazon wherein merchants could be arbitrarily booted off the marketplace at any time, and struggling to get their businesses reinstated, turned to illicit tactics.
“Given that these sellers were in the dark about their alleged wrongdoing, how to correct the problem, and when Amazon might recognize its error, sellers were frequently desperate and sometimes would resort to illegal means to obtain the information necessary to accomplish the goal of saving their businesses,” according to the memo. “The ‘information necessary’ was the annotations.”
Dix said Amazon has processes in place to help sellers avoid deactivation and get reinstated when appropriate. The company has for years been investing in improving its communications with sellers, speeding up response times and more clearly indicating policy violations, she added.
“There is no place for fraud at Amazon and no excuse for resorting to illegal activities,” Dix said in a statement.