Shein Accused of Criminal Activity in Bombshell RICO Lawsuit

A lawsuit filed on Tuesday claims that Shein, the viral Chinese fast-fashion giant, violates the Racketeer Influenced and Corrupt Organizations Act, better known as RICO. This lawsuit is a notable intensification from the numerous lawsuits the company has dealt with for trademark infringement lodged by various brands and artists over recent years.

The 52-page complaint was filed on behalf of plaintiffs Krista Perry from Worcester, Massachusettes, and Jay Barron and Larissa Martinez from Los Angeles. Represented by attorneys Jeffrey Gluck and David Erikson, the plaintiffs assert that Shein infringed their trademarks, a claim laid out in the first five counts of the lawsuit submitted to the U.S. District Court of California's Central District. Martinez is the CEO and owner of "Miracle Eye," a Los Angeles firm that specializes in crafting custom-made clothing.

The lawyers argue that RICO statutes, typically used by prosecutors to freeze assets of organized crime syndicates, are also applicable to civil complaints. They refer to the "civil prong of the Racketeer Influenced and Corrupt Organizations Act, which was formulated to tackle the misconduct of individual entities within a larger organization.”

The lawsuit states, “It is well established that egregious copyright infringement (of the type alleged here, and of the type referenced in other similar cases against Shein) constitutes racketeering."

The 2005 amendment to the federal RICO law pertains to "criminal infringement of a copyright," which under 17 U.S.C. 506(A) and 18 U.S.C. 2319, must contain elements of "willful infringement for the purposes of commercial advantage or private financial gain.”

For a RICO claim to hold, it requires the offending party to be a criminal organization, not merely an individual or business. The lawsuit posits that Shein's conduct aligns with such a description, as the company's misconduct is "committed not by a single entity, but by a de-facto association of entities. [...] the same decentralization that facilitates Shein’s criminal infringement and other racketeering activity, renders individual components of the enterprise, such as Defendants, liable under civil RICO.”

The lawsuit questions Shein's method of determining which products to duplicate. “Although its details and precise methods are secrets, it’s possible to infer certain facts about Shein’s algorithm by looking at its results,” the complaint states.

There are numerous precedents of Shein settling with plaintiffs, including artist Maggie Stephenson from Jacksonville, Fla. She claimed that Shein appropriated her “One is Good, More is Better” art piece for a clothing line, which led to a lawsuit worth $100 million. The lawsuit concluded with a settlement for an undisclosed amount on May 10. Another artist, Jen Stark, also represented by Gluck, currently has a pending lawsuit against Shein.

A groundbreaking case was filed against Shein last November by Gluck on behalf of Cookies, a cannabis-inspired apparel company. This case challenged Shein on the grounds of not only trademark infringement but also counterfeiting. If proven, counterfeiting could potentially lead to a triple monetary judgment. A civil RICO verdict would also provide a higher judgment. Gluck emphasized that the two filings are separate, but both it and the Stark case were referred to in Tuesday’s filing as indicative of a pattern of infringing behavior.

On April 4, an amended complaint in the Cookies case saw the term “counterfeit” substantially reduced in its usage. This shift was likely due to an unrelated discrepancy in Cookies’ trademark status.

The term “criminal” was used 23 times in Tuesday’s lawsuit to accuse Shein of running a “criminal” operation. Specific accusations include “Defendants recognize the liability exposure for their obvious counterfeiting and willful and criminal infringing activities,” and “…intentionally and criminally infringing Plaintiffs’ and others’ copyrights for massive financial gain.”

The plaintiffs are seeking past and future damages—tripled—along with legal fees, and injunctive relief to “prevent further racketeering activity.”

Shein, facing allegations of "racketeering" - a term used 18 times in the complaint, has not provided any comment on this pending litigation.