This Amazon seller lost $400,000 in sales after being attacked by self-proclaimed 'virus of Amazon'

Key Points
  • Pure Daily Care had the top-selling facial steamer on Amazon before a rival began attacking its listing.
  • The storefront was suspended for seven weeks during the busiest season of the year.
  • Pure Daily fired half of its employees and is liquidating inventory to pay bills.
Kyle Walsh | CNBC

David Damavandi should be an Amazon success story.

Using the company's marketplace, the 31-year-old entrepreneur built revenues in his skin care business to more than $10 million annually in seven years, thanks in large part to having the most popular facial steamer on

But rather than gearing up for Cyber Monday and a potential blockbuster holiday season, Damavandi's Los Angeles-based company, Pure Daily Care, is in crisis. For the bulk of 2017, he says he's been under assault by a rival brand named Krasr, which he says ripped off his top product, spoofed his email address and tricked customers into posting a barrage of negative reviews.

Cramer's Mad Dash: Amazon can't destroy everyone
Cramer's Mad Dash: Amazon can't destroy everyone

In one text message to Damavandi, a person purporting to represent Krasr called himself the "virus of Amazon" and threatened to put him out of business.

"Cash flow is dead," said Damavandi, who's already let go of half of his 12 employees. "These guys are putting people out of business overnight."

After a seven-week suspension from Amazon and $400,000 in estimated lost revenue, Damavandi's storefront — Beauty Imports — was reinstated on Nov. 8. Now he's sitting on hundreds of thousands of dollars of inventory that he has to sell at a deep discount to pay his suppliers and remaining employees.

The Krasr clone, meanwhile, was still listed as the best-selling product until CNBC told the company that the story was about to be published. According to Amazon's website, the product was unavailable for much of the day on Thursday and Pure Daily has now reclaimed the top spot.

Down the rabbit hole

This is a story of unfettered capitalism, another example of a gigantic global technology company having a platform it can't control, where malicious actors run amok.

Facebook's vulnerabilities were exposed during the 2016 election when Russian propagandists infiltrated the network and targeted people with fake news, and Google's YouTube is in a constant struggle to determine the boundaries between free speech and over-the-top outrage.

On Amazon, the Wild West problem is particularly acute for small businesses. Millions of merchants like Damavandi have been drawn to Amazon's marketplace because of the company's massive customer base, logistics operation and global network of fulfillment centers. More than half the items sold on Amazon now come from third-party sellers.

But the marketplace is highly susceptible to fraudsters intent on exploiting the site's loopholes. While Amazon has taken steps to help brands protect themselves from counterfeits, it can't react quickly enough to the many tactics scammers are using to win business at the expense of legitimate sellers. The marketplace is just too big, with too much activity.

Damavandi's case surfaced over the summer in an Amazon seller forum post he wrote about his experience. The post was subsequently deleted, but it was archived on another website and the link was shared with CNBC. However, as of Friday, the post was gone.

We contacted Damavandi, who confirmed that he's the author. He was reluctant to cooperate for this story out of fear of retribution from Krasr, but he agreed to fill in the holes as needed.

He says his problems began in early April, when a new product from Krasr suddenly popped up in the facial steamer category with hundreds of five-star reviews. The listing for Krasr's Nanosteamer used the exact image and content from his Nanosteamer, including taking this line in its entirety: "A Bonus 5 piece surgical grade stainless steel blackhead and blemish extractor kit is included with every Nanosteamer."

Cloning a product on Amazon can be perfectly legal. However, there are still laws preventing the use of other people's photos and descriptions.

Damavandi, having spotted a clear offender, filed a copyright infringement claim with Amazon to get the Krasr product removed. He was successful.

Then, Damavandi says, the madness started. (Krasr denies the following narrative, saying in one email that, "This is all a joke and completely made up," and in another that it sounds like Pure Daily is doing whatever it can to get rid of "threats and competitors.")

Damavandi was contacted on WhatsApp by a person claiming to be "from Krasr," who asked him to withdraw his infringement claim. Damavandi said he would first need Krasr to remove stolen content from its product page.

The next day, April 4, Damavandi received a puzzling email from Amazon saying the company had received his request to retract the infringement complaint.

But Damavandi says he never sent any such request.

The email from the apparent impostor to Amazon, which CNBC has viewed, used the address that Damavandi allows Amazon to give other sellers if a conflict needs to be resolved. Krasr is the only entity that would have gotten access to that email address for that specific claim.

There were several clues it was a fake email. The sender claimed to be emailing from "onyxdist" — the shortened version of Onyx Distribution, Damavandi's distribution company, and also the suffix in the email address, but not a name that Damavandi would ever have used in communications. The email ends with "Sincerely, Dama" — referring to the prefix in the email address and a shortened version of his last name. He said he never uses this name in emails.

Damavandi tried to clear the confusion up with Amazon immediately, but the company ignored him, he said.

It's certainly not the first time Amazon has been duped. In September, CNBC reported on a fake law firm tricking the site into kicking off the seller of a popular toothbrush head. Late last year, a number of Samsung sellers were suspended because of mistaken infringement claims, and the site has become generally more chaotic in recent years since Amazon started openly courting Chinese sellers.

After the fake retraction email to Amazon, Krasr was right back up and running with its Nanosteamer. And the attacks on Damavandi's product were just beginning.

'Let the war begin'

A few weeks later, Damavandi got a series of messages on WhatsApp from a man who represented himself as a Krasr employee. In the messages, he threatened to take down Damavandi's listings and leave "s--t reviews." This person called himself the "virus of Amazon," claimed to have 17 brands, and said that if Damavandi kept this up "your store listings will go down."

He also said, "Let the war begin."

Krasr's founder, Mohamed Multhazim Akbar Ali, said he has no knowledge of any such text messages being sent.

Texts from Krasr to Pure Daily Care

Damavandi is not certain who this person was or how they got his phone number. However, Amazon puts third-party sellers in touch with each other to resolve disputes. So Amazon likely gave Krasr Damavandi's phone number and email address following the infringement claim.

The phone number where the text message appears to have originated started with country code 971 (United Arab Emirates). An internet search on the full number ties it to a Facebook page for a group called Amazon Best Sellers.

The contact information on that Facebook page includes a link to a product from SnoreCare, a trademark that's owned by Ali, the same person who owns Krasr. Here's a screenshot of the Facebook page. (The last digits of the phone number have been blurred out.)

Shortly after we contacted Ali for this story, the Facebook page disappeared. Ali also said that the Krasr and SnoreCare brands are "totally unrelated" — even though the terms of service page on the SnoreCare website said at the time that it was "operated by Krasr." After sending Ali a screenshot of that page, it was changed to say "operated by Snore Care."

Soon after Damavandi's text exchange, the Pure Daily device was being pummeled with one-star reviews.

This time, Damavandi claims, somebody gained access to his seller account and figured out which of his customers had returned his product. Then, he says, that person or group sent fake emails to these customers pretending to represent Pure Daily Care and inviting them to leave poor reviews.

One of the allegedly fake emails, which CNBC has seen, promised a $200 Amazon gift card if the recipient submitted a "truthful comment on the product experience." (Amazon cracked down on paid or incentivized reviews last year.)

This email claimed to be from "Susan, Chief Customer Relations of Pure-DailyCare" and had a mailing address in Texas. (Damavandi says there is no "Susan," and his company is based in California.) This email included a link to Amazon. By clicking on it, a consumer would be sent to a pre-populated one-star review of Pure's Nanosteamer. Here's what happens when we tried the link:

According to Damavandi's post in the seller forum, his Nanosteamer listing got about 30 one-star reviews from June 6-7 — or almost as many one-star reviews as the product had received in total over the previous two years. Pure Daily saw its star rating tumble from 4.5 to 4, hurting its position on Amazon and ceding sales to other products — namely the Krasr Nanosteamer.

"We experienced a 23,000 percent increase in negative reviews in 24 hours," Damavandi said. He said he had to cut the price in half to $20 because of the attacks, "but as I lowered my price they got more aggressive."

In September, another tactic emerged. Amazon started receiving infringement claims against Pure Daily's products from Guerrilla Mail addresses, which are disposable and temporary email addresses. Then came more fake emails to Amazon, Damavandi said, which made it appear as if Pure Daily was lying about those supposed claims.

Amazon doesn't like when third-party sellers lie, and the company responded by shutting Pure Daily down.

To support his cause for reinstatement, Damavandi hired Chris McCabe, a former Amazon employee who now helps embattled sellers.

As Damavandi was burning through cash, he and McCabe repeatedly tried to get answers from Amazon's seller performance team. They got multiple responses saying the company was reviewing the case. Almost seven weeks later and without an explanation, Pure Daily was reinstated.

McCabe said that Damavandi's case is one of the wackier he's seen, but it's far from isolated. An increasing number of spoofing cases are popping up, he said.

If Amazon "thinks you're sending an email and you're not, that's pretty scary," McCabe said. "People are getting very savvy with these schemes."

At the time of publication, Krasr's facial steamer had lost its visibility on Amazon but other products from the company, including its blackhead remover, were still prominently ranked.

What we know about Krasr

Ali, Krasr's founder, is a 23-year-old Toronto resident who goes by Zim.

In his email correspondence with CNBC, Ali denied having any involvement in efforts to attack Pure Daily's listing, and said nobody from Krasr sent text messages to Pure Daily, spoofed emails, or manipulated reviews.

Ali said he's in the private labeling business. He gets manufacturers to provide him with products that he can label with his own brands and sell in various places.

"We find products that sell well and order quality goods from different countries and sell them on Amazon," he wrote. He said that his company sells "the goods to multiple online retailers who resell them."

Krasr is one of numerous trademarks owned by 10093939 Canada Corp., a company that Ali incorporated in February, according to the Government of Canada Federal Corporation Information website. He personally owns a number of other trademarks as well.

On Amazon, Krasr had been using the Daily Essentials Fulfillment storefront to sell products under the brands Ali owns. Just before publication, all the items disappeared from the storefront. The products included nose vents from SnoreCare, an electric dog collar from Bark Solution, an electronic insect killer from Pest Soldier and a disco ball strobe light from Zitronik.

If you go the websites of the brands, there's a familiar pattern. The phone numbers and addresses are often bogus. For example, the address given for Bark Solution in Bloomsburg, Pennsylvania, doesn't exist and the phone number doesn't work. Pest Soldier claims to have an authorized retailer in Las Vegas, but a web search on the address connects it to a locksmith. We called the locksmith, who said he'd never heard of Pest Soldier.

Ali declined to provide information regarding customers, retailers, or suppliers and said that "some of the websites might have temporary addresses because they are new websites and they're not all complete."

The only thing Ali admitted was that Krasr received an initial infringement claim from Pure Daily, and he said the image was then changed even though he disputes the allegation that his company was actually infringing. Otherwise, he said Pure Daily "appears to be making up all these false accusations" to frame Krasr.

Amazon tends not to offer details on specific cases, and it's no different for this story. Here's the company's statement in full:

"Amazon is constantly innovating on behalf of customers and sellers to ensure they buy and sell with confidence on, and this includes systems to prevent and detect fraud. If we discover that bad actors have abused our systems, we work quickly to take action on behalf of our customers and sellers. If a seller believes we've made a decision that requires further review, we encourage them to contact us directly so we can investigate and take the appropriate action."

Amazon's business certainly isn't suffering — the stock is up 52 percent this year. For the holiday period, Amazon is expected to report its fastest quarterly sales growth in over six years, with revenue jumping a projected 37 percent to $59.7 billion, according to a Thomson Reuters survey.

Cyber Monday deals have already started.

Damavandi, meanwhile, said he's in "liquidation mode." He has to get rid of excess inventory to pay the bills. And even though his store is back up, all of the negative reviews are still there.

We called Damavandi on Thursday after Krasr's product was taken down. He said that while he's likely to make more money now, he doesn't have much confidence that his business is sustainable.

"I've been trying to call attention to this for half a year now and it seems like they don't have the systems in place," Damavandi said. He's reluctant to invest in his Amazon business knowing "that this guy is still out there and will probably want to come back at me one day," he said.

Clarification: Damavandi and McCabe were trying to reach the Amazon seller performance group, not seller support.

WATCH: The future Bezos

Here's the future Jeff Bezos saw for himself at 80, if he didn't found Amazon at 30
Here's the future Jeff Bezos saw for himself at 80, if he didn't found Amazon at 30