Chinese Fraudsters Sentenced for Swapping 6,000 Fake iPhones for Real Ones
Two Chinese nationals have been sentenced to prison in the United States for a large-scale fraud scheme. They deceived Apple out of $2.5 million worth of products by exchanging over 6,000 counterfeit iPhones for genuine ones.
The fraudulent scheme exploited Apple’s policy of offering a one-year warranty on new iPhones, which allows users to return defective devices for free replacement. Apple also offers extended warranty plans for additional coverage.
Apple provides several ways for customers to send in defective iPhones for repair or replacement, including free shipping via UPS, FedEx, or DHL, visiting an Apple retail store, or contacting an authorized service provider.
Between July 2017 and December 2019, Haotian Sun and Pengfei Xue, along with their accomplices Wen Jin Gao and Dian Luo, abused Apple’s warranty service to exchange as many fake iPhones as possible for real ones.
According to U.S. law enforcement, the fraudsters shipped counterfeit devices from Hong Kong to commercial mail receiving agency (CMRA) mailboxes at UPS locations. These mailboxes were opened using genuine driver’s licenses and university IDs.
Sun and Xue then submitted the fake iPhones, which had counterfeit serial numbers and IMEI numbers, to Apple retail stores or authorized service providers. In return, they received brand-new smartphones from Apple. The genuine devices were then sent back to Hong Kong to other members of the fraud ring for resale.
“During this criminal conspiracy, the group submitted over 6,000 fake phones to Apple, resulting in losses of more than $2.5 million,” the U.S. Department of Justice reported this week.
Unsurprisingly, this activity did not go unnoticed for long. U.S. postal inspectors arrested the fraudsters in December 2019.
Earlier this year, a jury found Sun and Xue guilty of mail fraud and conspiracy to commit mail fraud. At the time, it was reported that each faced a maximum sentence of 20 years in prison.
It has now been revealed that Sun was sentenced to 57 months (four years and seven and a half months) in prison and three years of supervised release. Xue received 54 months (four and a half years) in prison and three years of supervised release. Additionally, the court ordered them to pay Apple $1,072,200 and $397,800 in restitution, respectively.