US Hop Source of Englewood faces bankruptcy after foreign scam, corporate lawsuit
The father-son team behind a hops wholesale company has faced tough years recently: first falling prey to a foreign scam, then grappling with legal action against two corporate giants. Now, Randall and Tase Flores, the pair behind US Hop Source in Englewood, fear bankruptcy is their only way forward.
The trouble started in the fall of 2020 when US Hop Source received a request for a price quote on 1,100 pounds of hops from a so-called Marcos Estrada of Estrada and Sons for a new brewery being built in Panama City, Panama. The Floreses’ company buys and sells hops around the world.
“It wasn’t out of the ordinary,” said father Randall Flores, 63, pointing to deals they’ve done with a Swedish merchant and a craft brewery in Palau.
First, it was business as usual: providing prices, chatting over the phone, starting the invoice process and taking a credit card payment for about $19,000, which initially posted, he said.
A follow-up email from Estrada prompted US Hop Source to hold those hops, as he placed an additional order valued at $31,000. Another credit card payment was issued, but this time, online payments company Paysafe flagged it for further investigation.
Later, it was determined that both major payments were fraudulent. “We fell prey to a very sophisticated, international business scam,” the elder Flores said.
The Floreses are hardly the first to be tricked in an elaborate scheme. The Federal Bureau of Investigation listed business and investment fraud as one of the most common types of scams and crimes it runs into.
The Denver District Attorney’s Office recently issued fraud alerts about home improvement scams, Internal Revenue Service phone scams and tax season phishing, among others.
In 2020, the number of Americans who fell for online fraud totaled close to half a million, with victims aged 50 to 59 years old typically losing the most, according to SEON, which helps online businesses with fraud management. A case of online fraud in the U.S. costs the injured party about $7,000 on average.
However, for the Floreses, the financial situation is worse. After receiving the first payment of around $19,000, the team at US Hop Source had already begun buying related supplies and shipping, not realizing “the card number that was used was a JPMorgan Chase bank card number that does not nor has never existed,” Randall Flores said.
Tase Flores, 32, said, after it dawned on them, they tried to contact Estrada and Sons to no avail. They filed police reports and met with the Department of Homeland Security.
Paysafe soon came calling for its money back, although “it was more than two weeks before they realized that they had paid out $19,000 on a credit card number that never existed,” Randall Flores said. The Floreses allege that Paysafe terminated US Hop Source’s account in December 2020, and tried to withdraw money from the company’s bank account several times.
Paysafe declined to provide comment for the story.
In January, US Hop Source filed a complaint against both Paysafe and Chase with the 18th Judicial District Court in Arapahoe County, arguing a breach of contract by the former and negligence by the latter. The Floreses sought a judgment that they don’t owe debt, and hoped to get money for attorney fees.
“By approving credit card transactions to a non-existing credit card number, Paysafe acted recklessly,” according to the Floreses’ complaint. “JP Morgan owes a duty to merchants to use reasonable care when approving credit card transactions purportedly made on cards issued by it.”
After some legal back-and-forth, representatives of Paysafe argued, “US Hop Source currently owes Paysafe $24,050.00 in funds charged back which were unpaid,” according to the counterclaim filed in March.
Chase filed a motion to dismiss in April, describing the events as “unfortunate, however as a matter of law, they do not and cannot give rise to liability for Chase.”
The court dismissed the case in May. Eric Coakley, who represents the Floreses, explained this dismissal as likely because of the case law that “a bank is not responsible for fraud committed by a third party,” although “those cases tend to come up when someone steals someone’s credit card.”
He called this specific instance with the Floreses “a new one on me.”
When asked for comment, Michael Lindsay of Snell & Wilmer LLP, who represented Paysafe alongside Ciera Gonzalez, responded, “Paysafe does not comment on pending litigation.”
Ronald Tomassi, Jr., and Gregory Carter of Leόn Cosgrove LLP, who represented Chase, didn’t respond to multiple requests for comment.
“The Arapahoe County District Court didn’t find any fault by Chase and dismissed US Hop Source’s complaint against the bank,” Chase spokesperson Maura Cordova said in an emailed statement.
In June, Chase filed a motion for attorneys’ fees, with Tomassi writing that the bank incurred over $14,000 in fighting the complaint by US Hop Source.
“They’re just trying to put us — a small, two-man operation that’s struggling to begin with — out of business, just because they made a mistake,” said Randall Flores, who described the company’s current financial situation as “dire.”
Coakley said, among a few possible legal actions, “the next step might be bankruptcy for these guys, unfortunately.”
He hopes for a potential legislative fix. “When a bank makes an error like this, the risk shouldn’t be on the merchant.”
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