[MUSIC PLAYING]

- A large-scale smuggling bust. The Feds seized 300,000 pairs of fake sneakers that were headed into the tri-state.

DEXTER THOMAS (VOICEOVER): This month, a group of Chinese smugglers were arrested trying to bring 300,000 counterfeit Nike sneakers, worth about $73 million, into New Jersey.

REPORTER: The sneakers would then be taken to locations in Brooklyn and Queens. They would sell for about $190 a pair.

DEXTER THOMAS (VOICEOVER): The 42 containers of sneakers came from China. It hasn't been determined what city they came from, but in China, everyone knows that Putian is the city of fakes.

CHAN: What's up, Reddit? So it's Chan, and today, we are at the C4 factory.

DEXTER THOMAS (VOICEOVER): One counterfeit seller was willing to give us a rare look at his operation.

CHAN: A one and only pair of C4 frozen yellow with gum soles freshly made at the factory today. Come on in.

DEXTER THOMAS: What are we looking at here?

- Well, this is pretty much our base of operation. You can call it an office. It's basically just an apartment unit. You need a large space to put the shoes and organize them and sort them out before you ship them away.

- So what do we got here? I see we got some Balenciagas here.

- Yeah, these are a Balenciaga replica. So, lately--

DEXTER THOMAS (VOICEOVER): Chan wasn't always in the fake sneaker business. He used to be a med school student in the UK. While looking for a pair of rare shoes, he found fake pairs online and realized they were all coming from the same place. Eventually, he decided to get in on the business himself. Because this is all part of a black market, he wanted to wear a mask during the interview.

They call these the dad shoes, so, you know.

- Dad shoes.

- Yeah, dad shoes. You know, it looks like something your father would wear--

- Definitely.

- --years ago.

DEXTER THOMAS: What do these run USD if they're real?

CHAN: I believe they cost somewhere around 800.

- And what do you sell these for?

- We sell them normally at about 120 US dollars.

DEXTER THOMAS (VOICEOVER): Shoes like Balenciagas, Yeezys, and Jordans aren't just expensive. They're also usually extremely limited. If you're desperate, you could buy from a reseller, but that's even more expensive. So for some people who just got to have the latest pair, the best option is to buy fakes.

- Reddit is a good source of information for us to keep ourselves updated on what the customer wants.

DEXTER THOMAS (VOICEOVER): So in 2016, while Chan was still in med school, he started his own business selling fakes, or what he calls high quality replicas. Pretty soon, he was moving up to 120 pairs of shoes a day, which, on average, brought in over $100,000 a month. He hired a few employees to do the dirty work. But eventually, he moved to Putian himself to be closer to the action.

- How common is this kind of work in Putian?

- This is a very major industry. It forms pretty much the backbone of the local city economy.

DEXTER THOMAS (VOICEOVER): As soon as the sun sets, the bikes come out. Each pair is picked up by a courier at the factory and then taken to a middleman, who packs it up and gets it ready for shipping right there in the middle of the street. At any given moment, there are thousands of fake shoes flooding intersections and back alleys. This isn't a coincidence. Nike and Adidas have both had official factories in Putian since the 1980s, which means that it's pretty easy to find the same materials and the same employees that you find in a legit factory. Some stores operate in plain sight, logos and all. And police look the other way-- usually.

- Now, these just came out very recently.

- Really?

- Yeah, they dropped about three weeks ago. What we have here is a replica of the Off-White Converse.

DEXTER THOMAS: How do you have a replica of these made if these just came out?

- If you want to truly make something that is very close to the original, you need a pair of the original shoes in order to cut it up and fully deconstruct. So people managed to procure a sample of the original shoe before they're even sold. So these are commonly called backdoors.

- And you've already got replicas ready to go.

- Yeah, we have at least three versions of this Converse being made. So this is one of the better ones, I feel.

DEXTER THOMAS (VOICEOVER): The Converse chain is holding are part of a limited edition Off-White collaboration made by superstar fashion designer Virgil Abloh. They're one of the most sought after sneakers today. And in the resale market, they go for up to $1,500 a pair.

- From a customer standpoint, I'm sure they're very happy to get a much cheaper version of the shoes that they like. From your standpoint, you're making money. They're winning, you're winning. Is anybody losing here?

- Obviously, the first thing that comes to mind will be the brand owners. But I feel it actually helps to increase the brand awareness of the brand owner, so it's actually a win-win-win situation for everyone involved.

- Really? Let's say you're sitting across from Virgil Abloh. You think he'd say the same thing?

- Virgil Abloh did actually mention something about replicas once before.

- I love counterfeits. It's the best feedback. It's better than like a great review on Vogue. Like, if it's working to the point where someone else can profit off that, that means it's really working.

DEXTER THOMAS (VOICEOVER): But that was Virgil Abloh last year. And since then, he seems to have changed his mind. This year, his company launched a multimillion dollar lawsuit against companies who were selling counterfeit merchandise.

- These are replicas of the human races. So--

- So what's the matter with these?

CHAN: Oh, customers probably complained that, hey, for $60, I expect that the edges of the embroidery must be clean and sharp. And, you know, I'm not happy with this. I don't want this.

DEXTER THOMAS (VOICEOVER): But the biggest threat to Chan's business isn't lawsuits, angry designers, or even the threat of government raids. It's his own customers. They expect perfection in their fake shoes. And if they don't get it, they're just as vocal about their disappointment as they would be for a normal business. A single negative review can cost Chan tens of thousands of dollars in lost sales and tank his business for months.

- This room is mostly stockpiles that resulted from customers complaining that, hey, I don't like certain features of these, which are not what I expected. They're not as good as I expected.

- So this wall is just full of rejects.

- Yeah, to put it plainly, this is just the reject room.

DEXTER THOMAS: [LAUGHS] Wow. Does it ever frustrate you when you get some negative message from some kid in high school who's freaking out because the stitching is ever so slightly crooked on their shoes?

- Yeah, it does. When you're wearing a pair of shoes, no one in their right mind goes up close to your feet and say, hey, that looks 0.5 inches off. I think it's fake. A normal person doesn't do that. All these things don't actually matter in real life.

- Are you a sneakerhead yourself?

- Personally, I wouldn't call myself a sneakerhead.

- Really?

- Yeah, footwear is something that is supposed to be functional. As much as I think that the shoes look ridiculous at times, it is my core business. So I'm in no place to judge anyone.