It was a scheme that seemed perfect for this duo.
Imagine this scenario: Tesla (TSLA) buys the electric vehicle battery manufacturer it works for in Canada.
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You and your friend are intimately aware of the technological advantage that Tesla is buying to obtain the company, and you and your friend use that knowledge to your advantage to try to make a quick buck and start a new company in China selling said technology.
It sounds like the perfect heist, but unfortunately, it was only a matter of time before the plot was discovered, and now the couple will have to pay for the consequences of their actions.
Former Tesla contractor sentenced to prison
According to the US Department of JusticeKlaus Pflugbeil, a former Tesla contractor, was sentenced Dec. 16 to 24 months in prison for stealing trade secrets from the Elon Musk-led automaker to set up a competing company.
Pflugbeil, a 59-year-old German-Canadian resident of Ningbo, China, pleaded guilty in June to the feds' allegation that he and his business partner Yilong Shao passed off Tesla's battery manufacturing secrets as their own to undercover agents. from the FBI.
Shao is still on the run from authorities and is believed to be in China. The People's Republic of China does not have an extradition agreement with the United States.
“By stealing trade secrets from a U.S. electric vehicle manufacturer for use in his own China-based company, Pflugbeil's actions benefited (the People's Republic of China) in a critical industry with national security implications,” the Attorney General said. US Deputy General Matthew Olsen. in a statement.
Scamming Tesla's battery secrets
Pflugbeil's two-year prison sentence was the result of a complaint related to the theft of Tesla's patented technology, specifically precision metering pumps and other equipment used in high-speed battery assembly lines.
Although the filed complaint does not explicitly mention Tesla by name, it does say that both Pflugbeil and Shao worked at a Canadian company called Hibar Systems, which developed technology that was purchased in 2019 by “a leading manufacturer of battery electric vehicles based in USA.” vehicles and battery power systems.”
According Electrical Autonomy CanadaTesla purchased Hibar Systems, based in Richmond Hill, Ontario, Canada, in 2019. Court documents show that in late 2019, Pflugbeil and Shao conspired to establish their own business using “original documents” and “drawings” they had collected while They worked. in Hibar and Tesla.
“(We have) all the original assembly drawings in PDF,” Shao confirmed to Pflugbeil, according to court documents from the Department of Justice.
In a statement from Justice Department and FBI officials, Breon Peace, U.S. Attorney for the Eastern District of New York, said Pflugbeil and Shao established a company in China in mid-2020 that copied vehicle battery manufacturing equipment. Hibar and Tesla electrics.
Prosecutors say the business later expanded to Canada, Germany and Brazil.
In information publicly available on the business social media website XING, Pflugbeil is listed as a “partner” of Ningbo Psycho Machine Co. Ltd., a company based in Ningbo, China.
Related: Feds charge entrepreneurial duo with stealing and selling valuable Tesla intellectual property
“(Pflugbeil and Shao) built a business in China to sell sensitive technology belonging to an American company. Their actions were bold—they even announced that they were selling the victim's products—because they thought, incorrectly, that it was out of their reach. of U.S. attorneys,” said U.S. Attorney Peace.
According to the Justice Department statement, Pflugbeil went so far as to market the business as an alternative to Tesla's, even purchasing digital advertising space on Google, YouTube and LinkedIn that “was displayed tens of thousands of times per week.”
The Justice Department also noted that Pflugbeil even cold messaged potential partners on LinkedIn.
“Hello (name), I hope to take advantage of your busy time. I would like to introduce you to our company. We have already supplied companies such as (list of US Fortune 500 companies by name),” Pflugbeil's LinkedIn messages read, according to the DOJ.
“We design and manufacture all of our products in-house and guarantee that none of our products infringe any patents, copyrights or other intellectual property rights of any third party.”
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According to the Department of Justice, the duo came onto the federal radar after undercover agents met Shao at a trade show for the packaging and processing industries in Las Vegas in September 2023.
The agents, posing as businessmen, established a relationship with them based on their interest in purchasing a battery production line for use at a battery manufacturing facility on Long Island.
The agents established a relationship with Pflugbeil and Shao through their social engineering.
In November 2023, Pflugbeil sent agents a proposal for a battery production line containing Tesla's intellectual property, which he cited as costing about $15 million.
On March 19, undercover federal agents kidnapped Pflugbeil in a sting operation disguised as a meeting on Long Island to negotiate a deal for the equipment.
According to the Department of Justice, the duo made more than $1.3 million from intellectual property they took from Tesla before they were caught.
Tesla, Inc. trades on the NASDAQ as TSLA.
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