CyberRebate Bankruptcy Has E-Shoppers Reeling

Thousands of online consumers are out millions of dollars, according to a bankruptcy filing by e-tailer CyberRebate.com made May 16th in U.S. bankruptcy court in New York.

Of the top 20 debtors listed on the bankruptcy filing by CyberRebate, a site that promised rebates of up to 100 percent on its highly overpriced merchandise, nine were individuals owed between US$79,216 and $115,650 in rebates.

“As much as I would love to be optimistic, I think consumers are going to be left holding the bag,” Tom Storm, owner of the discount Web site and forum FatWallet.com, told the E-Commerce Times.

Long Island, New York-based CyberRebate’s bankruptcy petition, filed May 16th, listed liabilities totaling $83.4 million — most of which was reportedly money owed to consumers for rebates never received — and assets of $24.5 million.

Scores of consumers, lured by CyberRebate’s promise of a no-hassle refund, were induced to buy merchandise that was priced as much as 10 times the retail value. For instance, printers that typically sold for $150 were selling at CyberRebate for $1,500 and DVDs costing $12.99 at Amazon were sold for $169.99.

“People would max out their credit cards frequently,” Storm said.

Shattered Trust

Postings on message boards reveal that some people claim they spent their life savings at CyberRebate. Storm said that though “it does seem crazy,” CyberRebate had built trust by consistently sending rebate checks.

Like most CyberRebate shoppers, Joe Gladkowski began by making fairly small purchases at the e-tailer. When the checks kept coming consistently he began buying more and more. He estimates that he spent over $20,000 at the site and is owed rebates of $8,300.

“I started shopping at CyberRebate in November 1999,” Gladkowski told the E-Commerce Times. “I was skeptical at first but took a chance and ordered $400 worth of mostly toys for Christmas.”

Gladkowski added: “The rebates came 14 weeks later as promised. I then ordered more each time increasing the amount and basically just churning my money for product.”

Presents and Profits

CyberRebate shoppers bought for a variety of reasons, with some spending thousands on presents for themselves and others buying merchandise for resale.

“I think the people that ‘invested’ a lot of money were trying to make some money on the deal,” Kim Rowley, owner of the savings site ShoppingBookmarks.com, told the E-Commerce Times. “I belong to a newsgroup where those ladies turned around and sold the stuff at yard sales and flea markets.”

Carrie Stenhjem, a CyberRebate shopper allegedly owed $8,000 in unpaid rebates, said that she shopped for gifts she would normally not purchase.

“We are thinking about what we could have spent this much money on,” Stenhjem said. “We haven’t had a real vacation in three years. Our children are the real innocent victims in this action.”

Who Should Pay?

Although the merchandise was bought, paid for and received, some consumers feel that their credit card issuers should take responsibility for the losses incurred due to unpaid rebates, pursuant to consumer-protection clauses.

Others, like Storm, believe that even though the credit card companies have no legal obligation to make good on CyberRebate’s debt, it may be in the best interest of the credit-card companies — and e-commerce — for the credit-card companies to cough up the cash.

Storm pointed out that if the credit-card companies assumed the debt, they would have a “much bigger stick” to go after CyberRebate’s remaining assets.

‘A Gambling Problem’

Then there is another contingent that believes that CyberRebate’s shoppers should bear the losses themselves.

“These unfortunate people who patronized CyberRebate are looking for recourse where none should be available to them,” online shopper Mark Drury told the E-Commerce Times.

“They have what amounts to a gambling problem, and like all gamblers who have suddenly hit the skids they see themselves as victims,” Drury added.

Storm Warning

Although some CyberRebate shoppers were surprised by the company’s bankruptcy, including Gladkowski, who had made a purchase through the site on May 14th, there were signs as early as last summer that the company was in trouble.

In August 2000, CyberRebate agreed to pay $40,000 and change its business practices to settle an investigation by the New York Attorney General into the company’s misleading online advertising. The investigation revealed “widespread delays” in the processing of rebate checks, according to the state attorney general.

The New York Attorney General’s office has now posted a notice on its Web site advising consumers that if they have believe CyberRebate owes them money, they must file a Proof of Claim with the bankruptcy court.

Model or Muddle?

Some also believe that CyberRebate knew that its business model was too good to be true long before its bankruptcy filing.

Storm said that he had heard from a former CyberRebate employee who claimed that as early as October, the company’s executives knew that its business model was flawed because it relied on the premise that some people would not file and return their rebate forms.

According to Storm, the company also made money by holding consumers’ money for up to 14 weeks before issuing rebates.


    • These people are getting ripped off just like employees who are getting laid off with no severance pay after working without pay for weeks. But some companies apparently don’t care — if I were one of the affected consumers, I wouldn’t hold my breath waiting for the money I was owed.

      • We all pay into the shared risk process whether it’s with credit cards or subsidized

        uninsured motorist coverage.

        If you want something to be indignant about, consider the cost we all bear for those

        unwilling or unable to stop smoking. I’m sure compared to just one year’s medical

        expenses for those who have cancer from an activity that is well documented and well

        known to be a extremely high risk behavior is a pittance compared to the few million the

        credit cards may have to settle.

        And of course we all pay into the shared risk system that allows smoker’s to behave with

        wreckless disregard for the consequences.

        • But the employees who worked without pay will be at the top of the heap

          in the bankruptcy proceedings and will get something approaching 100%. The

          people owed rebates will likely be at the bottom and get a far lower percentage.


          • I “bought” a number of products from Cyberrebate and received every rebate in six separate purchases between 2/99 and 1/01. I ended up with a free: modem, ethernet card, joystick, 3 mouses, CB radio, set of ginsu knives, computer microphone, 2 cordless headphone sets, coffeemaker, cellular headset, cordless phone (with headset), water filter, showerhead, some classic books, foot massager and some other knick knacks and gadgets that I cannot remember now.

            I feel badly for the people who did not get their rebates, and was just lucky to get my last rebates in April and not purchase anything since then. When a company that has been doing business for over two years, and posts on its site that it has given out over 93 million dollars, says it will give you your money back, and has repeatedly done that, wouldn’t you trust them?

            I do not think the credit cards should be liable, I think that these clowns should be personally liable to the consumers. Since when is bankruptcy and limited liability designed to protect someone who sells you something at ten times its worth and promises to return all the money and doesn’t? All the while sending rebates based on other people’s inflated purchases (a pyramid scheme if you will) and knowing that some of the people at the end would be left with the big donut. That is at most fraud, and at least gross and reckless negligence, two good reasons to pierce the veil of corporate protection and sue the individuals personally. That’s who should hold the bag.

            Finally, I would avoid two other companies who are emulating C-rebate’s gimmick: http://www.publisherspipeline.com and http://www.urbanq.com

          • I, personally think that Joel Granik, CEO of Cyberrebate, should be thrown in the slammer for many years. Why are all of these people who are posting on this board actually trying to turn the blame onto the consumer? This is nuts. Cyberrebate.com was highly deceptive and made its money from a rebate basis, not by making money off of products. Funny how there had been investigations into this company long before they declared bankruptcy, and now that they filed Chapter 11, everyone (including the AG) is running pointing the finger at everyone else. How nuts is this? And for some more interesting information…there are actual web-pages that have Mastercard, Visa and American Express that advertized for Cyberrebate.com! I know that this is not considered an endorsement, but WHY would major corporations suggest to use this Cyberrebate website? (Especially when these credit card companies are trying to snake out of holding the bag?) And does this mean that all executives that run Yahoo and other multi million dollar organizations are to blame? I don’t think so. Cyberrebate.com is to blame and they should do the appropriate thing: Investigate that Joel Granik for FRAUD! This man knew what he was doing and took not just your average “Joe” for a ride, but major multi million dollar companies right along with him. This man FOOLED EVERYONE. I’d like to see this man behind bars and his little partner real estate attorney from South Florida, Joe Lichter. End of story.

          • How can you possibly compare the associated medical costs from smoking to this? While I agree that smokers directly inflate medical costs to all, smokers were NOT looking for SOMETHING FOR NOTHING. For the most part, smokers are victims themselves, lured to an addictive habit by greedy corporations (much like shoppers looking for something for nothing were by CyberRebate). If you want to compare smoking, why not compare other things where the actions of others directly affects all of us? Auto insurance costs are driven up for all by the stupid and inconsiderate acts of others, health insurance costs are drivven up by the acts of a few, including doctors themselves.

          • You conspiracy theorists have a good theory, but did you ever consider the possibility that Granik had a risky new idea, and that in the end, it just failed?
            I bought a load of items from c-rebate when they first started and items were priced NORMALLY. When I noticed prices of items started doubling and tripling, then I quit using c-net. I was always skeptical of c-rebate, because I couldn’t see how it could make money except from investing soon-to-be-rebated-money until it was actually rebated. I figured things were not working as planned when c-rebate began jacking it’s prices. And especially in the terribly economic times, c-rebate looked like a bad place to continue buying. So I quit buying there. Consumers take risks whenever they buy anything, except in ways that they are protected specifically by law. Buying from c-rebate seems no different to me, if, in fact, c-rebate legitimately intended to honor it’s sale promises.
            Either way, the consumers that lost money got screwed. But just because they got screwed doesn’t entail that c-rebate was a big scam.

  • CyberRebate had to be a scam from the beginning. Consider what they were doing and the effects of some of their actions. 1) The cost of an item was falsely inflated up to and perhaps over 1000%. What did this do? I sell 500 MP3 players for about $300 each totaling sales at $150,000. CyberRebate sells those same MP3 players for about $2500 each, totaling sales at $1,250,000.00. Consider all the other items sold with these same inflated prices, and your annual sales volume is extremely (although falsely) high. Take that to a bank looking for a business loan, or to an investor looking for their money to be dumped into your business. You show the bank or the investor your falsely inflated sales for that specific period of time and they think WOW, that looks great. You get their money to continue building your falsely inflated business. All the while, you’re giving yourself an enormous salary and in just a couple of years, you’re in the money – specifically someone else’s money. The company files for bankrupcy and, personally, you’re not responsible.

    2) They lure consumers into buying items with the idea of a 100% rebate, the old “get something for nothing” idea. Being skeptical, consumers try it with small purchases and get their rebates. They think, this is great, I did get something for nothing. Why not go for more? So they do. CyberRebate now has tens of millions of dollars from consumers (again other people’s money) who are still thinking they’ll get something for nothing. CyberRebate files for bankruptcy and all the consumers are collectively out millions of dollars.

    Think it sounds like a scam? Sounds more like a plan!

  • Three oldies but goodies spring to mind:

    “A sucker is born every minute”

    “There is no such thing as a free lunch” and

    “A fool and their money are soon parted”

    Why would any thinking person grossly overpay for goods in the expectation something may come their way later? That some believe their card issuers should be liable astounds me.

    Caveat Emptor!

  • While I feel sorry for the people who lost money here, what happens the next time one of these

    places that is offering overpriced merchandise “free after rebates” goes belly up? Should the

    banks bail out those shoppers too? Where does it end? I AM a creditor of Hi-Val due to their

    bankruptcy last year. I AM owed $20 in rebates. Should my credit card company reimburse me for that?


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