It seems unlikely. I haven't torn my pack apart as it's still working fine, but it seems to me that these cells are already pretty cheap -- I can buy four of these cells for about $16 total, and Magicshine can probably beat that.

The cells I have purchased are clearly new and not ripped out of an old laptop battery. (They're not from Magicshine, but are the same sort of cells that the packs are made of.)

I guess that really the thing to do would be to get some bad packs and tear them apart and try to figure out what's going on -- see if all four cells are bad or just one, see if the protective circuits have fried, etc. And if the cells really are recycled, this should be pretty obvious, unless they went to a lot of trouble to hide it (more than would really make financial sense, considering how cheap the cells are.) Magicshine ought to be doing this already -- it's not difficult at all.

My guess is that the problem really is the protective circuits in the pack and the charger that probably relies on the circuits in the battery rather than it's own brains rather than the cells themselves.