News ID: 241050
Published: 1008 GMT April 07, 2019

Scheme to swap fake iPhones adds up to $900,000 loss for Apple, prosecutors say

Scheme to swap fake iPhones adds up to $900,000 loss for Apple, prosecutors say
THOMAS PETER/REUTERS

The con was simple: Send a fake iPhone to Apple claiming that the device would not turn on and that it was under warranty, and not long after, a genuine replacement arrived in the mail.

It was a scheme that federal prosecutors said two college students in Oregon repeated on such a scale that it amounted to nearly $900,000 in losses for Apple as they sent in hundreds of counterfeit phones, The New York Times reported.

The two students, identified as Quan Jiang and Yangyang Zhou, would then ship the iPhones overseas where they would be sold for hundreds of dollars, and in return, they would get a cut of the profit, according to court documents recently filed in United States District Court in Oregon.

The investigation started two years ago, after customs officials seized several shipments coming from Hong Kong containing cellphones from China. The devices appeared to be Apple products, with the logos and design features of an iPhone, but the shipping methods and packaging raised the suspicions of officials who determined that the phones were counterfeit, the authorities said.

Investigators discovered that the cellphones were bound for Mr. Zhou’s mailing address and that they were part of an importing operation that also included Mr. Jiang, Mr. Zhou’s neighbor in Corvallis, Ore., about 85 miles south of Portland.

Records provided to investigators by Apple allowed them to connect Mr. Jiang to 3,069 iPhone warranty claims through his name and his email, mailing and IP addresses. All of them indicated “No Power/Wired Charging Issues” as the reason for the claim.

More than 1,500 of the claims were rejected, but nearly just as many were approved, with a new phone sent out. An Apple representative told an investigator, according to court records, that a key element of the scheme’s success was that the phones were inoperable, which meant the replacement process would begin before technicians could figure out they were counterfeit.

Mr. Jiang told investigators in an interview he had submitted some 2,000 phones in 2017. He also said that he employed friends and relatives in the US to help swap out the phones. He said that an associate in China who sold the genuine phones paid Mr. Jiang’s mother, who lives in China; she deposited the money in a bank account that he could access in the US.

With each phone costing $600, the losses for Apple amounted to $895,800, officials said.

Apple, which did not respond to a request for comment on Saturday, is not the only technology giant that has been targeted by scammers. A Lithuanian man recently pleaded guilty to an effort in which he sought to bilk Facebook and Google out of millions of dollars by submitting fraudulent invoices to the companies. Prosecutors said that from 2013 to 2015 the companies wired more than $100 million to the man and his associates.

 

   
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