AppleCare+ to the Extreme: Chinese Men to Pay More than a Million for False Repair Claims
Two Chinese nationals were sentenced on Oct. 2 after being convicted of participating in a scheme to defraud Apple Inc., according to a DOJ press release. The two men were charged with defrauding Apple out of about 6,000 iPhones, costing the company over a million dollars.
Joint Op by Homeland Security and Post Office
Haotian Sun, 34, from China, living in Baltimore, and Pengfei Xue, 34, from China, living in Germantown, Maryland, were found guilty on Feb. 20 by a federal jury in a U.S. District Court in the District of Columbia, according to the February DOJ press release. They were arrested on Dec. 5, 2019, after the U.S. Postal Inspection Service and Homeland Security investigated the case.
In an affidavit filed on Dec. 2, 2019, by investigators to support a criminal complaint, Sun, Xue and two others were accused of submitting counterfeit iPhones to retail stores so “genius bar” employees would replace them with real iPhones.
Elaborate Replacement Scheme
From around June 2017 to September 2019, Sun and Xue obtained out-of-warranty iPhones equipped with counterfeit parts, according to the affidavit. They then took the phones either in person to Apple retail stores or authorized Apple servicing locations or used private or commercial interstate carriers to mail the phone to Apple, falsely claiming their phone was under warranty and needed replacement due to them malfunctioning.
Believing that the counterfeit phone was legitimate and under warranty, Apple replaced the phone with a new iPhone either in person or by mail, according to the affidavit. Sun and Xue could trick retailers this way because the counterfeit iPhones contained spoofed IMEI numbers. IMEIs are unique identifiers on mobile devices. Apple uses these identifiers to determine if they are still under warranty.
The IMEIs that Sun and Xue used were the same as devices belonging to Apple customers who were still under warranty or covered under their AppleCare+ plan, according to court documents. Using these spoofed numbers, Sun and Xue tricked Apple out of thousands of phones.
DHL Shipments from China
Sun and Xue opened several UPS mailboxes in Washington D.C. and Maryland, where they received large DHL Express shipments of counterfeit iPhones from various locations in Hong Kong, the affidavit detailed.
During the investigation, investigators intercepted several packages for Sun and Xue that they suspected were counterfeit iPhones, recorded the spoofed IMEI numbers, and allowed the packages to pass through. Investigators then gave Apple the spoofed IMEI numbers and instructed them to provide the names, addresses, and emails of the people initiating the returns.
Sun and Xue had pled not guilty in court but were found guilty by a federal jury. In Sun’s defense filing, Sun accepted responsibility, apologized for the scheme and requested a 31-month sentence.
Sun received a 57-month prison sentence, along with three years of supervised release, in addition to a forfeiture of $53,610 and restitution to Apple of $1,072,200, according to the DOJ press release. Xue was sentenced to 54 months incarceration with three years of supervised release and a forfeiture of $19,890 and $397,800 in restitution to Apple.
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