Mary Altaffer / AP
Two men allegedly scammed Apple out of nearly $ 900,000 by fake iPhones for legitimate devices.
According to federal prosecutors, there are a lot of people in the family, while using nonsensical pseudonyms and a slew of mailing addresses.
Apple filed a complaint with Apple, claiming the phones were broken and would not turn on. Apple would then replace the knock-offs with genuine models – in most cases, that would ship those items back to China, to which they received a cut.
Yangyang Zhou and Quan Jiang, who were both engineering students in the U.S. on F-1 student visas at the time, attempting the switcharoo with 3,069 iPhones between April 2017 through March 2018, prosecutors said in a criminal complaint filed in Portland, Ore.
It turns out to be something like a 50-50 gamble whether Apple would be duped.
Jiang and Zhou, who were processed and released devices at $ 600 per iPhone, according to a "brand protection specialist" who spoke with a Homeland Security special agent.
In all, the Apple bilked out of $ 895,800.
The remaining claims – 1,576 of them – were rejected for tampering and returned to the sender, along with a letter explaining why the claim had been denied. None was identified as counterfeit, according to the documents.
JEXE IDENTIFICATION NUMBERS: Mobile phone ID numbers, so called IMEI numbers, that would indicate the devices were covered by the repair warranty. (The IMEI includes information on the origin, model, and serial number of the mobile device.)
The complaint does not come to an end.
Apple discontinued printing serial numbers on devices after the iPhone 6 Plus model.
According to court documents Jiang laid out an interview with Thomas Duffy, a special agent with Homeland Security Investigations. Jiang admitted he received the dummy phones from "Associate" in China, 20 to 30 at a time. He said he used friends, relative and name variations from China, as well as the replacement phones from Apple.
It seems that at least one instance, Jiang may have used the name "Apache Helicopter" to file a claim in a new phone, prosecutors say.
The complaint also reads Jiang explained he deliberately coordinated the iPhone shipments to different addresses in the U.S. in Customs and Border Protection.
Jiang's mother allegedly collected his share of profits in China, then deposited the money into an account.
In some cases, Jiang said he paid his friends for their help, according to court documents.
But, the affidavit says, Jiang and Zhou deny that they were acquainted with the iPhones they were receiving and exchanged for, that they were engaging in fraud.
Their claims contradict Apple's lawyers, according to the filings. Jiang Zhou's address is Apple's legal counsel sent to the company in 2017, placing it on a notice that he is importing counterfeit Apple products. "
Duffy's testimony states Zhou and Jiang, now in their early 20s, came under investigation in 2017, after Customs and Border Protection seized more than five shipments of fake phones addressed to the pair. A search of Jiang's home in March 2018, produced more than 300 counterfeit devices, along with shipping and warranty submission records, Duffy said. Law enforcement also discovered multiple cases associated with Zhou, one of which allegedly contained 25 fake iPhones.
Jiang is facing charges of trafficking in counterfeit goods and wire fraud. Zhou is being charged with "submitting false or misleading information on export declaration."
The fake iPhone laundering scam has become so widespread in China that "Apple has already developed a more rigorous replacement plan to avoid" fraud.
In 2015, a Chinese-language online forum, called Chinese In LA, warned readers about a job seeking to recruit students to return inoperable iPhones from China to U.S. Apple's stores. The ad targeted non-English speakers without a Social Security number, promising a "rebate" of $ 30 per replacement and suggested that 8 to 10 devices a day could be returned.
The original ad has been deleted on the site.
Huo Jingnan contributed reporting.