In a sophisticated scheme that spanned two years, two Chinese nationals residing in the United States managed to defraud tech giant Apple of $2.5 million by exploiting the company's warranty system.
The duo tricked Apple into replacing thousands of counterfeit iPhones with genuine ones, according to federal authorities.
As reported by The New York Post, the elaborate scam was orchestrated by Haotian Sun, a Baltimore resident, and Pengfei Xue of Germantown, Maryland. Between 2017 and 2019, the pair successfully convinced Apple that the counterfeit iPhones they sent for repairs were authentic. The Justice Department described the operation as a "sophisticated" scheme.
Sun, 33, has been sentenced to 57 months in prison and ordered to pay over $1 million in restitution to Apple. His accomplice, Xue, also 33, received a 54-month sentence and was instructed to repay the company $397,800.
The duo, along with their co-conspirators, were found guilty of shipping 6,000 counterfeit iPhones from Hong Kong to Apple. These devices, accompanied by spoofed serial numbers, were sent to Apple retail stores and other licensed service providers. The scam was exposed when an Apple informant alerted federal authorities, leading to an investigation spearheaded by postal inspector Stephen Cohen.
The investigation revealed that thousands of counterfeit phones were being shipped from China. Apple's warranty policy allows iPhone users to return their devices for repair within a year of purchase. However, Sun and Xue exploited this policy by shipping phones that were either out of warranty or contained counterfeit parts.
Cohen's affidavit revealed that Apple was led to believe that the phones were under genuine warranties. Consequently, the company often replaced dozens of fraudulent phones returned in a single shipment. To avoid detection, the fraudsters used different aliases and opened new mailboxes, making it appear as though Apple was not receiving phones from the same individuals.
The breakthrough in the investigation came when federal agents began intercepting packages and traced the addresses back to Sun and Xue. Instead of arresting the men immediately, the agents recorded the serial numbers of every phone in each intercepted package and allowed the shipments to reach their intended recipients.
The government then provided Apple with these serial numbers. In response, Apple supplied the names, addresses, and email addresses used to process the returns. Investigators found that Sun had submitted over 1,000 repair requests using several email addresses, some of which were registered in his real name.
The meticulous investigation even involved law enforcement officers rummaging through the trash outside the men's homes and conducting stakeouts to track when they delivered intercepted packages to Apple Stores. This case serves as a stark reminder of the lengths to which fraudsters will go to exploit corporate policies and the importance of robust systems to detect and prevent such fraudulent activities.
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