MINNEAPOLIS (CN) — The penny auction site DealDash made hundreds of thousands of dollars selling phony name-brand products, according to a class action from a Californian who says he lost thousands of dollars to the scam.
Grant Pstikyan filed the complaint against DealDash in Thursday with a federal judge in Minnesota.
DealDash, founded in 2009, has registered millions of paying users throughout the United States, and American retirees are its largest demographic, according to the 35-page lawsuit.
While purportedly based in Finland by its 24-year-old “controlling owner,” William Wolfram, DealDash exclusively targets American consumers and ships merchandise only to the United States, the complaint states.
DealDash.com “purports to offer consumers the chance to win brand name merchandise for a tiny fraction of the retail price,” the complaint states.
“Consumers pay money in advance for a certain number of intangible ‘bids,’ and then spend those bids in daily ‘auctions’ in hopes of winning the offered products at steep discounts,” the complaint continues. “DealDash continually advertises to consumers that they can save up to 90%, or more, off brand name merchandise ranging from electronics, to furniture, to art, to flatware, to clothing and accessories.”
It adds: “The problem is that DealDash is sham.” Pstikyan claims that Deal Dash actually is an illegal lottery, and that “the luxury ‘brand name’ products that DealDash offers consumers are not true luxury brands at all; they are cheap, generic brands that do not sell in substantial volumes anywhere, except through DealDash and one of its affiliates.”
Pstikyan says he spent $5,923 buying 44,250 bids on DealDash’s website in November and December 2016. He says he spent still more money on the bids themselves, but lost most of the auctions, and even when he “wins,” he and others spend far more, through buying the right to bid and the bids, and the sale price, than the cheap, generic knockoffs are worth.
“DealDash advertises its fake ‘brand name’ products at outrageously high retail prices —totally divorced from economic reality,” the complaint states. “In fact, consumers are betting on products that are not worth even half their advertised values, and in some cases, not worth one tenth of the advertised value.”
DealDash does not disclose how many prepaid bids its “winners” spend on an item, Pstikyan says, though it’s often more than the item is worth. “Meanwhile, DealDash auction losers — all but one participant in each auction — lose all of their prepaid ‘bids’ and walk away with nothing. Thus, when a consumer loses a DealDash ‘auction,’ the House wins. When a consumer wins a DealDash ‘auction,’ the House wins. Even ‘winning’ consumers unwittingly lose.”
The hook is the 10-second countdown for each auction, Pstikyan says. Once an auction begins, a 10-second clock begins to count down. During the countdown, any user with prepaid bids in their DealDash account can place the first bid. If there is a higher bid, the countdown clock resets to 10, and the pattern continues so longer as higher bids come in, until the 10-second clock runs out.
Aside from the bid offer, the cost of making each bid comes to whatever the consumer paid for it, usually 12 to 15 cents, Pstikyan says.
But DealDash auctions usually run for several hours, or even days, so the costs of bids alone can exceed the cost of any item. “If the 10-second clock runs out at a time when the featured item’s price has ticked up to $100.00, this means that participating consumers have spent a total of $10,000 bids in the auction, with the last bidder (whoever they are) ‘winning’ the right to purchase the offered product from DealDash for an additional $100.00,’” Pstikyan says.
In other words, a winning bidder who jumps in at the end may spend less than $1 on his bid, but the losers collectively may have spent more than $1,000 for the right to lose.
DealDash did not respond to a request for comment on Friday.
Pstikyan seeks class certification, disgorgement of unjust profits, and damages for consumer fraud, false advertising, unlawful trade practices and unjust enrichment.
He is represented by Daniel Hedlund with Gustafson Gluek in Minneapolis, and Jeffrey Krinsk with Finkelstein & Krinsk in San Diego, California.