The New York Times reports that Georgia Arms was the highest bidder and bought the spent shells in June.
The shell casings come from the police firing range. Georgia Arms reloads them and sells them.
The Times said Georgia Arms sells bags of bullets with no identification required. Such a transaction would be impossible in New York City with its strict gun laws.
The sale of used police shell casings is a legal and not uncommon practice.
Chief policy adviser John Feinblatt said Bloomberg stood behind the sale and would allow similar sales in the future.
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