Fraudsters in US exchanged $3 million worth 2700 fake iPhones for real ones: How did the scam work?

In the United States, two Chinese citizens have been convicted for fraud amounting to over $3 million. Over several years, they purchased counterfeit iPhones in Hong Kong and sent them to Apple for repair, intending to exchange them for genuine smartphones. This scheme allowed them to exchange thousands of devices.

Haotian Sun and Pengfei Xue, both 33 years old and residing in Maryland, along with accomplices Wen Jin Gao and Dian Luo, engaged in submitting counterfeit iPhones to Apple service centers from June 2017 to September 2019. These devices were presented as original ones, supposedly requiring warranty replacement due to damages.

During their operation, they attempted to exchange around 5000 fake iPhones. Apple caught onto the scheme, exchanging over 2700 devices as they used serial numbers and IMEI codes from genuine iPhones. Eventually, these devices were found to contain counterfeit components, leading Apple to conduct an internal investigation, uncover the fraudulent activity, and report it to law enforcement. Subsequent investigations revealed batches of counterfeit goods intended for the fraudsters.

"Sun and Xue acquired batches of counterfeit iPhones from Hong Kong, using UPS mailboxes throughout the District of Columbia. They then shipped fake iPhones with counterfeit serial numbers and/or IMEI codes to Apple retail stores and authorized Apple service providers," stated a representative from the U.S. Department of Justice.

Both fraudsters were arrested in 2019, but their court appearance happened only recently. They were convicted of mail fraud and conspiracy to commit mail fraud. Sun and Xue could face imprisonment for up to 20 years. The final sentencing is scheduled for June 21.