FTC: California Internet Marketer Duped Brits By Making Them Believe He Was Operating In United Kingdom; $500,000 Judgment Entered Against Jaivin Karnani And ‘Balls of Kryptonite’

UPDATED 12:15 P.M. ET (U.S.A., FEB. 6, 2012) An Internet Marketer based in Calfornia used domains with “co.uk” extensions and duped British customers into believing they were doing business with a firm based in the United Kingdom, the Federal Trade Commison said.

The actions of Jaivin Karnani and his associated firms, including a company known as “Balls of Kryptonite,” led to Brits being charged “unexpected import duties” while leaving them with worthless warranties.

When customers tried to cancel their orders, they were hit with “draconian” cancellation and refund fees, the FTC charged.

Karnani and his firms, which sold cameras, video games and other electronics, have been bit with a $500,000 court judgment. Under the terms of a settlement with the FTC in which the defendants neither admitted nor denied the allegations, the judgment was waived because of the defendants’ professed inability to pay.

The settlement prohibits Karnani and the companies from engaging in deceptive business practices and from violating the Mail Order Rule. The FTC was assisted in its investigation by the U.K. Office of Fair Trading.

U.S. investigators brought the action under provisions added to the FTC Act by the U.S. SAFE WEB Act of 2006, the FTC said.

“SAFE WEB confirmed the agency’s authority to sue U.S.-based wrongdoers who harm consumers abroad, as part of a strategy to prevent the United States from becoming a haven for fraud,” the agency said.

Read the FTC’s amended complaint. The complaint alleges Karnani also operated a Belize company known as Intrigue Inc., which also did business from California.

As part of the overall fraud, the FTC said, British customers often did not receive what they ordered — instead receiving undisclosed “substitutions” unintended for sale outside the United States and perhaps even inoperable in the United Kingdom, along with an explanation that the ordered merchandise was out of stock.

The defendants, though operating from California, used pricing schemes and the name of the Royal Mail as pretexts to advance the scheme, the FTC charged.