Ex-US Arms Dealer: How I Sold Illegal Weapons To The US Government & Got Caught! | David Packouz

Did you know in that moment that you were doing something completely illegal? And whose idea was that?

We thought it was very likely illegal.

Um, we didn't know 100% it was illegal.

So the way, the way the whole repackaging the ammo, uh, story went down was that, um, at fir- at first, uh, so we were actually, was one thing they don't show in the movie, is that we were planning on repackaging the ammo before we even found out it was Chinese.

And the reason for that was because at the time-- So we were flying everything into Afghanistan by air freight, right? We, we, there was, Afghanistan is a landlocked country, and it's surrounded by Pakistan and, and, you know, a bunch of other s- unstable countries and, and Russia you have to go through if, depending on if you're going by rail.

So, um, we didn't feel like it was, it was safe to, to, uh, send things over land because you'll have to go through a bunch of like areas controlled by a bunch of warlords, and they would love nothing more than to get a whole bunch of ammo that they could steal.

And so we were flying everything by air freight.

And air freight is like 80% fuel, right? That's the cost of air freight.

So it go, it fluctuates with the fuel price.

So we bid the contract at a certain price, but by the time we won it, fuel skyrocketed.

Right.

And what a responsible company would have done was, uh, was bought a fuel hedge, right? It's kind of like insurance against the, the, the price of fuel going up.

But Efraim had a very high tolerance for risk, [chuckles] so he didn't wanna pay money for the insurance.

And so unfortunately, we got stuck with massive, uh, spike in, in the fuel costs, and we were unable to deliver this ammo profitably.

And i- we could still deliver the grenades profitably, the anti-aircraft rockets profitably because they were m- uh, the, the value of the cargo was much higher than the cost of the air freight.

So the air freight was a much smaller component of the value.

So, um, you know, just to give an example, uh, the shipment of grenades, the cargo cost, uh, we were getting paid two and a half million dollars for the cargo, and the air freight we were paying $130,000 for.

So it's a very small percentage of the value, right? So even if the air freight went from $100,000 to $130,000, it's not gonna affect the profits that much.

But the, the, uh, ammunition, the AK-47 ammo, the, the value of the cargo was much lower.

It was about like three hundred thousand or something of the value of the cargo.

And going up, uh, from 100,000 to 130,000, that ate up our entire profit margin.

We were making like a 10% profit margin on that.

So that ate up our entire profit margin.

And so we were gonna lose money delivering at that price and at these oil prices.

Did you know in that moment that you were doing something completely illegal? And whose idea was that?

We thought it was very likely illegal.

Um, we didn't know 100% it was illegal.

So the way, the way the whole repackaging the ammo, uh, story went down was that, um, at fir- at first, uh, so we were actually, was one thing they don't show in the movie, is that we were planning on repackaging the ammo before we even found out it was Chinese.

And the reason for that was because at the time-- So we were flying everything into Afghanistan by air freight, right? We, we, there was, Afghanistan is a landlocked country, and it's surrounded by Pakistan and, and, you know, a bunch of other s- unstable countries and, and Russia you have to go through if, depending on if you're going by rail.

So, um, we didn't feel like it was, it was safe to, to, uh, send things over land because you'll have to go through a bunch of like areas controlled by a bunch of warlords, and they would love nothing more than to get a whole bunch of ammo that they could steal.

And so we were flying everything by air freight.

And air freight is like 80% fuel, right? That's the cost of air freight.

So it go, it fluctuates with the fuel price.

So we bid the contract at a certain price, but by the time we won it, fuel skyrocketed.

Right.

And what a responsible company would have done was, uh, was bought a fuel hedge, right? It's kind of like insurance against the, the, the price of fuel going up.

But Efraim had a very high tolerance for risk, [chuckles] so he didn't wanna pay money for the insurance.

And so unfortunately, we got stuck with massive, uh, spike in, in the fuel costs, and we were unable to deliver this ammo profitably.

And i- we could still deliver the grenades profitably, the anti-aircraft rockets profitably because they were m- uh, the, the value of the cargo was much higher than the cost of the air freight.

So the air freight was a much smaller component of the value.

So, um, you know, just to give an example, uh, the shipment of grenades, the cargo cost, uh, we were getting paid two and a half million dollars for the cargo, and the air freight we were paying $130,000 for.

So it's a very small percentage of the value, right? So even if the air freight went from $100,000 to $130,000, it's not gonna affect the profits that much.

But the, the, uh, ammunition, the AK-47 ammo, the, the value of the cargo was much lower.

It was about like three hundred thousand or something of the value of the cargo.

And going up, uh, from 100,000 to 130,000, that ate up our entire profit margin.

We were making like a 10% profit margin on that.

So that ate up our entire profit margin.

And so we were gonna lose money delivering at that price and at these oil prices.