Chinese Ring Busted in Counterfeit Apple iPhone Swindal
The FBI busted a ring of Chinese nationals that took advantage of Apple’s generous warranty to exchange any defective product, by exchanging thousands of counterfeit iPhones, iPads, and other Apple goods for brand new Apple products.
According to a Los Angeles Grand Jury indictment, the Silicon Valley-based technology giant suffered at least $12.3 million in losses from the actions of five Southern California-based Chinese nationals.
The alleged gang members arrested on Thursday and arraigned on Friday, included ringleader Yang Song, 40, of Corona; Junwei Jiang, 37, of East Los Angeles; Zhengxuan Hu, 26, of Alhambra; Yushan Lin, 30, of Corona; and Shuyi Xing, 34, of Corona. Charges at the United States District Court in downtown Los Angeles include:
conspiracy to commit wire fraud and mail fraud,
aggravated identity theft,
seven counts of wire fraud,
12 counts of mail fraud, and
conspiracy to traffic in counterfeit goods.
United States Attorney Martin Estrada at a news conference stated, “Companies should not be victimized and defrauded for being responsive to customer needs, and these federal charges send a message that our office will take decisive action to uncover and prosecute those who perpetrate fraud.”
Special Agent in Charge Eddy Wang stated, “Protecting American ingenuity, ensuring economic security, and shielding the consumers across the nation is a top priority for Homeland Security Investigations.” Wang praised the cooperation between Apple and other private sector partners in targeting this large-scale fraud operation: “We have prevented millions of dollars from lining the pockets of this transnational criminal organization.”
According to the indictment, Chinese nationals with co-conspirators in China sought to introduce more than 16,000 fraudulent devices into Apple’s product line with the purpose of exchanging them for genuine devices to be sold for profit from at least December 2015 to March 2024.
The counterfeit Apple devices were designed to look like genuine Apple devices included identification numbers matching the numbers on real Apple products that had been sold in North America sold to real customers were under warranty through Apple’s manufacturer warranty and AppleCare+, Apple’s extended warranty program.
The defendants’ counterfeit iPhones, iPads, and other devices also appeared to have been legitimately purchased, and thus lawfully eligible for Apple’s warranty programs. The real identification numbers and serial numbers on the allegedly returned counterfeit devices essentially allowed members of the ring to impersonate the real Apple devices owners throughout the United States.
As part of the scheme, the defendants allegedly visited multiple Apple stores throughout Southern California, including Apple stores in Beverly Hills, Sherman Oaks, Pasadena, Irvine, Northridge, Manhattan Beach, Brea, Rancho Cucamonga, Cerritos and at shopping malls such as The Grove in Los Angeles, South Coast Plaza in Costa Mesa, Fashion Island in Newport Beach, and The Americana at Brand in Glendale.
The gang members would drive all over Southern California in a single day and visit as many as ten different Apple stores where they returned counterfeit devices. Reasons given to Apple store employees included devices would not power on, were physically damaged, or had other defects. Apple employees replaced fake devices with a genuine Apple device or sent the defendants’ counterfeit devices to a repair center.
Defendants over several years took multiple steps to disguise their identities and hide their fraud included renting dozens of mailboxes at UPS stores across Southern California; misspelling mailing addresses they provided to Apple employees to disguise the fact that they were processing numerous fraudulent returns of Apple devices.
At least 16,0000 Apple devices were fraudulently obtained at a cost to the company of about $12.3 million, then shipped to co-conspirators in the U.S. or in China, where they were resold at a substantial profit.
The defendants if convicted could face statutory maximum sentences of 20 years in prison for each of the conspiracy to commit mail and wire fraud, wire fraud, and mail fraud charges. Plus the defendants face a statutory mandatory minimum sentence of two years in prison for the aggravated identity theft charge, and a statutory maximum sentence of 10 years in prison for conspiracy to traffic counterfeit goods
.