How counterfeit Rolexes are produced and distributed, according to an investigator

Business Insider

Rob Holmes is a private investigator. He works with major luxury-watch brands to track down fakes and stop them from getting to market.  Holmes speaks with Business Insider about how counterfeits are made in factories overseas. He gives details about how fake luxury goods are trafficked into the United States and distributed to consumers, tells us how the counterfeit industry has evolved with the rise of a new generation of "superfakes," and gives advice about how to spot a counterfeit. He also examines a genuine Rolex and gives tips on how to spot a genuine watch.  Holmes began investigating counterfeits during his childhood: His father, Rob Sr., was a renowned counterfeit investigator in New York in the 1980s. Holmes describes his dad's encounters with Chinatown gangs and tells Business Insider how he and his brother are carrying on their father's legacy through their investigations business, MI:33.  Find out more: https://linktr.ee/holmespi https://mi33.co/

Transcript

00:00 My name is Rob Holmes. I'm a private investigator. I've stopped millions of dollars of counterfeit watches entering the US market

00:06 This is how crime works

00:08 It's estimated that

00:14 23.3 million counterfeit watches are circulating in the US right now

00:17 There have been plenty of stories of the counterfeit watch industry being tied to child labor

00:24 sweatshops and even human trafficking. You're gonna have organized criminals who are doing this kind of stuff

00:30 When I work undercover as a distributor, I have to be very credible. Doing what I do

00:34 doesn't come without a little bit of fear

00:37 Many of the fakes nowadays come with a box and the authentication certificates

00:49 You used to see watches that would just have maybe one of the trademarks like just the crown on the face

00:55 But not the crown on the dial. Now manufacturing has gotten so good that even the cheaper knockoffs have everything

01:03 There are people who buy

01:05 thousand dollar counterfeit watches. Patek, Rolex, Louis Vuitton, all the big brand names and

01:12 they buy these watches for a thousand bucks

01:16 because they are near clones and in that world the current term is epic

01:21 You can't tell it from the original and especially with some of the brands, especially Rolex

01:26 The only way you can tell is by opening up the watch and looking at the movement because the Rolex movement

01:33 There's no mistaking a Rolex movement from a counterfeit

01:35 I don't care how good the Chinese factories are. A Swiss movement made by Rolex is always going to be known once you open the back

01:43 [sound of machine]

01:45 If it is sold in America, there's a factory in China that makes an exact copy of it

01:54 It's just a matter of how high the quality is. Manufacturing in the counterfeiting world

01:59 replicates the manufacturing in the real world

02:01 Wherever manufacturing is cheap, that's where manufacturing is going to happen

02:07 These factories can afford the same machines that the real companies use and they use the same software

02:13 Often that software is stolen through industrial espionage. On these Chinese marketplaces

02:18 they have a tier for a manufacturer or a seller, a tier level where you can obtain an

02:25 inspection by the marketplace. They'll have a third-party inspector come in and take photos and check your

02:32 your location for child labor, all the regular things that people would look for and you can pay for a clean bill of health

02:40 But there's no telling what these factories are really doing

02:43 We know that some Chinese factories use forced labor

02:47 It used to be the 80s, 90s, even into the early 2000s

02:51 The watches would come here by container and then the logos would be put on in

02:57 factories here in the United States in sweatshops right in the major cities here in the US

03:02 That's kind of stopped because the Chinese factories have become so

03:06 so good that the American factories couldn't keep up with the quality

03:10 We find that most of the product comes out of major ports and you know Guangzhou

03:15 inside Guangdong. China became so good at logistics

03:20 It was much easier for people to sell as affiliates here in the United States and have them shipped

03:26 from the Chinese factories or the middlemen

03:29 This is how good these Chinese factories are. QC, which means quality control

03:34 They'll send you a high-res photo of your item and the shipping label

03:38 So you can check the item, make sure it's the right model and also make sure that the address is correct on your shipping label

03:44 You say yes, go ahead. Boom. Within a day or so, you'll get the tracking number

03:55 Watches would be shipped in say one case of watches, say a thousand watches or ten thousand watches in a small portion

04:02 And the rest of the container would end up being beach balls

04:05 You know cosmetics or anything cheap stuff. What they do is they ship it to their clearinghouse, a distributor in

04:13 Pennsylvania. They slap a new label on it and ship it to you from there. So it looks more

04:18 domestic and when it looks more domestic

04:22 It looks more trusted. But most counterfeit watches reach the United States

04:26 Through the US Postal Service or DHL. Shipped individually to the seller

04:33 You could buy one watch, you could buy five watches, you could buy a hundred watches

04:36 I buy samples from all over the world. One time I had a package sent to me and it was a toy alarm clock.

04:42 I opened it up. There was a watch inside. I haven't received a disguised counterfeit in

04:49 Several years and I think it's because of how easy it is to get across the border with just a little bubble wrap

04:55 The watches you buy on the streets, they're usually bought the same way by the seller. If you buy a hundred of them

05:03 They're eight bucks a piece

05:04 So you get a hundred of those

05:06 Package is only this big

05:08 Shipping is gonna cost 80-90 bucks and they know the Postal Service is flooded right now and customs is flooded right now

05:16 So it's really kind of a field day for the mailing of counterfeit watches

05:21 The US customs can't inspect every single package. They used to say they could they inspected one every thousand

05:28 You know

05:29 But I don't even know if that's possible anymore with everybody buying $20 dresses and things like that

05:34 Counterfeit distributors don't worry about the obstacles because the profit is so high

05:40 So if something gets stopped off at customs

05:42 They'll just ship you a new one and that happens very often even with a container those 10,000 watches

05:47 They get caught up in customs. That'll just be the cost of business. So those obstacles are pretty simple for them to bypass

05:54 In my perception the demand for fakes

06:04 non-deceptive counterfeits where you know, it's fake is

06:08 Simply because people like getting something over on the man from the 80s until now

06:13 I found that demand has been pretty consistent throughout the years

06:17 I mean no matter what the economy is looking like people like a bargain and people like to spend less for something that looks nice

06:22 Let me explain the gray market a little there is a market where people think they're getting a deal

06:29 You'll see, you know 20% off retail things like that

06:35 there's a gray market where things fall off the truck and things are diverted outside of

06:42 Outside of the original supply chain and once they get here in the United States, they can sell legitimate products

06:48 And it's including the watch industry

06:50 They can sell legitimate products at 10 20% off the the original price and they're real

06:57 But these companies have databases with those serial numbers in them and you take it to a real repair shop

07:04 They stick it through the database because a lot of watches are stolen

07:07 So you take it to a real repair shop. Oh, sorry. This watch was a gray market product intended for another place

07:13 So that's why once you buy something on the gray market, you're kind of always working underground

07:18 So that leaves you susceptible to buying

07:22 The epic fakes the ones that are a thousand bucks

07:26 But you're paying six or seven because you think it's wink wink

07:29 You know falls off the truck and a lot of these companies to that deal in the gray market do what's called mixing and

07:36 What they'll do is they'll have some genuine gray market and some that are counterfeit and they'll just mix them all in or they'll sell

07:44 Though you look like a sucker. I'll sell you the fake and I'll sell this guy the genuine

07:48 It's a very interesting world the secondhand market because it is kind of self-regulated

07:51 Obviously they self-regulate because of lawsuits - you know if you know

07:57 I make a test buy from one of these sites and it turns out to be counterfeit. They can get sued

08:02 So yeah, so there's a lot of liability at stake there, too

08:06 So the legitimate ones don't do that, you know, but again, you know

08:10 You'll have the shady ones, especially the ones that you walk up in tourist areas and they sell genuine secondhand watches

08:15 But maybe the one you have

08:17 You know is a fake

08:25 I tell people whether you're gonna buy a product or you're gonna have a product repaired

08:29 Go to an authorized dealer. But yeah, these repair markets are very shady

08:33 There was a case in the 90s that my father and stepmother worked called the Fort Worth

08:39 gold and jewelry exchange and

08:41 This guy his name was Ronnie Cooper

08:44 He advertised in all the national magazines and he would have ads that we buy gold

08:48 we buy watches we sell Rolex watches and

08:54 He would even do repairs what he would do when he bought the watches was he would replace the gold with gold plated

09:00 And he would constantly be doing that so you'd be buying a genuine watch

09:04 But most of the gold was swapped out and he did this for many years and jewelers still do that

09:10 They're often called Franken watches in the replica world. He got five years the guy he got five years for mail fraud

09:18 That's what they got him on because all this stuff went through, you know

09:21 Shipping and the Postal Service and things like that the brands don't like the secondary market because they take away from you buying a brand

09:27 new product

09:29 My dad was the guy on Canal Street in the 1980s and 1990s who caught the folks that were selling counterfeit watches

09:41 I grew up in the 80s

09:43 Going on range with my father and making undercover buys Canal Street was the epicenter for counterfeit watches in the entire United States

09:50 They had Midtown that was where all the folks with the briefcases would show up

09:54 Okay, those guys would walk around and you know the old hey, buddy

09:58 You want to buy a watch, you know that kind of thing or they would set up a briefcase with legs and they'd be very

10:03 mobile in Chinatown

10:05 They would be standalone stores with big metal roll-down roll-up doors on raid days

10:11 they would go with a van or a U-Haul truck with off-duty cops and firemen inside the backs back of the trucks and

10:20 They would have spotters along the way who would go to local diners and tell them the addresses where they've spotted those watches that day

10:28 then the people would fly out of the trucks and

10:31 If they didn't if they didn't get there in time and the guys rolled down and locked the doors we had industrial

10:38 industrial strength

10:40 Saws where we could saw through those locks

10:42 It wouldn't be uncommon for my father to come home with a U-Haul truck full of bags hefty bags full of counterfeit watches

10:50 Actually, I was the only 14 year old at my high school. It was walking around with a Rolex watch

10:55 Everybody knew it was fake but you know during my dad's Canal Street years

11:00 He would hire out-of-work actors in New York to disguise themselves and go conduct undercover investigations

11:07 Those people dressed up as homeless people pregnant people

11:10 Everything you can think of so that they're going through one day at a time and they don't look like the same person

11:17 Doing enforcement on Canal Street. It was no hayride

11:20 he had bodyguards and

11:23 He also had constant threats. There were people with guns shooting at them

11:28 They're very often times where people would come right after my father

11:31 I've been investigating counterfeit watches professionally since 1995

11:41 So when I started my company all the luxury brands knew who I was and they knew I started my own firm

11:47 And then I started getting cases from the luxury brands during my undercover by process, you know

11:53 We have undercover identities set up all over the United States

11:56 So, you know I could buy from the same website five times and they would think it's five different people

12:02 I have every counterintelligence method you can imagine

12:05 We do everything we can to make sure that these identities are not traced back to us the brands

12:13 Usually work directly with law enforcement if they can because it's expensive to hire an investigator

12:19 my cases are typically cases that might go civil or a case that law enforcement doesn't have the time for and

12:25 Then once my case is finished

12:28 Completed it's put on what I call a silver platter and then they will pass it on to law enforcement

12:35 there's various terminology in the counterfeit world in the watch industry a replica is a

12:41 Near perfect or at least look-alike version with the trademarks of an actual product

12:47 But then you have a lower level counterfeits you have say three to five hundred dollar counterfeits and they're mid-level

12:53 And then you have anything under three hundred

12:56 They call them the funny thing is those cheap watches. They're the ones you buy on the street

13:01 the keywords to find these counterfeits evolve because of

13:07 law enforcement mechanisms

13:09 You can't just Google

13:11 Counterfeit Rolex or counterfeit Louis Vuitton or even replica the word replica for the last 10 12 years has been pretty much

13:17 blacklisted everywhere along with brand names, so

13:19 They would come up with different words. They would also use

13:23 letter swaps like for Rolex they could use ROI

13:29 Exx if you're seeing words like replica

13:33 clone

13:35 dupe or one colon one one to one

13:38 You're probably looking at a counterfeit

13:41 If you're trying to figure out if a watch is a counterfeit first you need a magnifying glass

13:52 And then you want to look at the details on the watch face if there's any imperfection whatsoever

13:58 It's not real one of the great myths of

14:02 Counterfeit watches is that the genuine has a sweeping hand and the counterfeit has a ticking hand well that was resolved

14:10 Sometime in the mid 90s

14:13 So most counterfeits now have a sweeping hand so don't be fooled into thinking

14:17 That's a way to tell a counterfeit from a real

14:20 So I was just handed a watch for filming purposes, and I can tell this one's genuine

14:25 because see there's a crown logo at the 12 o'clock mark and

14:32 the

14:33 crown logo

14:35 has an oval at the headpiece part of the crown and that's etched in perfectly the quality of the

14:42 craftsmanship of this watch is

14:44 Impeccable the brand name is printed there

14:49 perfectly

14:51 Also with many of these watches. There's a magnifier at the date. It's called the Cyclops and

14:57 Counterfeiters don't always get that right and also the date with the magnifier and just be a little off

15:03 It's not perfectly that if the numbers 12 the day is 12. It's gonna be exactly there

15:08 It's not gonna be partially there and a lot of the counterfeits

15:11 They just can't get the date exactly right and the Cyclops - there is a the original brands

15:18 Have a very specific

15:21 Non-reflective

15:23 material they put on that Cyclops

15:27 That that holds it on to the watch and that's very hard to duplicate as well

15:32 So the clarity of the Cyclops is very very important

15:36 Also, you'll see

15:38 The brand name on the inside of the band now the high-end counterfeits may have those

15:43 But you do have to look for these things also the registered trademark on

15:48 the back you can look for that and see if they've gone to that great detail and

15:55 With this particular watch because it was made I'd say probably at least 20 years ago, maybe longer

16:00 In order to find the serial number you would have to actually take off the band here and you would have underneath

16:07 underneath the band edge here and here you'll have a serial number and

16:11 you'll have a

16:14 model number

16:15 especially with the Submariner and the diving watches

16:19 The bezel is very difficult to make so the Swiss engineering of the bezel is going to be

16:27 perfect with a genuine watch

16:29 Many of the counterfeits it's kind of jingly as you're moving it to do to do to do to do a lot of this stuff

16:35 Isn't one specific thing you look at the quality and you say wait, this isn't real because

16:41 You know, this is a little shaky. It should be more solid. You know, it's a little light should be heavier

16:48 The

16:50 Counterfeit watch industry is a financial crime you deal with all kinds of fraud in this world

16:58 Especially here in the United States, you know bank fraud all this kind of stuff in the 1940s

17:04 There was a law passed called the Lanham Act and it made

17:08 counterfeiting trademark goods illegal and

17:13 That law stood for a very long time. There were no penalties though

17:16 It was sort of symbolic and then my father along with very small community back then of folks

17:23 lobbying the US government to strengthen the laws the anti counterfeiting act of

17:28 1984 was passed and the anti counterfact of 1984 created penalties for each one of these offenses

17:36 Currently the federal laws are in

17:40 Trafficking so trafficking is illegal federally

17:43 So that's where customs comes in but most of the sale or display of counterfeit goods is state law

17:50 So in New York, you know, New Jersey

17:53 California almost every state has a display for counterfeit as

17:58 As a penalty and also in their penal codes the sale of counterfeits. I've seen people face some serious jail time

18:06 For selling counterfeits often. They're the most egregious but on the street level folks

18:11 It's the repeaters just like with drugs someone purchasing counterfeit goods online

18:16 Probably isn't going to enter law enforcement's radar or the brand's radar

18:21 Unless they are named or discovered as a supplier to someone else

18:26 Often because purchasing isn't necessarily it's not illegal to purchase but obviously

18:33 Trafficking is and you're bringing things over across the border. I've seen the civil penalties get very steep

18:39 When my clients want to sue someone often will look for assets if a person owns a house and the mortgage is paid off

18:48 You know, these people have the ability to pay

18:51 70,000 $100,000 in restitution and a judge will you know often comply?

18:57 So I've seen people's lives get ruined by selling counterfeits

19:01 (Sounds of a car engine)

19:03 It was in the late 80s when my father came across BTK the born to kill gang Vietnamese mafia

19:14 One day his brother who worked with him

19:17 Saw a wanted poster

19:20 With a $200,000 price on my father's head turns out the born to kill gang

19:27 They were charging all of these vendors for protection

19:32 But they couldn't protect them against my father

19:35 So they figured if they killed my father they would at least alleviate the problem and they would justify their own

19:42 Extortion racket and because of that we had locks on every door every window and my father told me one day

19:49 I remember he said Rob

19:50 I know you don't like listening to me

19:52 But if I ever say duck or jump you better do it because it might mean your life

19:57 And I always took that seriously after that I still do when my father's canal Street work started really taking off

20:03 I was uninterested in the family business

20:05 I was 17 18 19 years old and I was kind of going off doing my own thing

20:09 But my brother was like 13 14 years old and he was primed to do this work. He was bred for it

20:15 So my brother was running out gathering license plates and you know

20:20 Looking in windows and factory windows and things like that

20:23 I actually rebelled against the family business and I went to Bible College and I decided to drive to LA to become a stand-up comic

20:30 It turns out I wasn't very funny. But in the meantime, I needed a day job

20:35 But then I started going on raids just like my father on the opposite coast and it was amazing

20:42 Los Angeles is area

20:45 Similar to Canal Street, New York is called Santee alley and it was a several block area just like New York's Chinatown. It is

20:52 filled filled with counterfeits in the 90s

20:55 Santee alley just like Canal Street. It was the Wild West

20:59 Everywhere you went there were watches

21:02 Everywhere. I mean people had them up and down their arms. They had them in briefcases

21:06 They had them in

21:09 At booths they had people who rented space out in front of booths and paid thousands of dollars for that

21:15 Yeah, and then after years and years of doing that in the 90s

21:18 My boss retired in 2001 and I started my own company

21:23 They started my company in oh one I was working a lot of the similar cases with my father and my brother

21:34 So then my father passed in oh four. Yeah after my father died

21:39 I thought it was important to continue the family legacy

21:42 His company folded because he had nobody in New York to follow in his footsteps

21:46 And then after he passed my business was taking off and I needed to duplicate myself and I figured

21:53 What better way to duplicate myself than to partner with my brother?

21:57 Ever since then I mean there's not a day that goes by that we don't think about dad

22:01 I mean, it's hard not for me not to look at my brother and see something, you know

22:06 One of my dad's traits we grew up watching him work. He was our hero and

22:11 We emulate him we both do so yeah, I mean it's nice. I mean sometimes I feel like he's in the room

22:16 You

22:34 You

22:36 You

22:38 You

22:40 You

22:42 You

22:44 You

22:46 You

22:48 You

22:50 [BLANK_AUDIO]

Category

Transcript

Recommended