Apple was allegedly scammed out of hundreds of thousands of dollars by college students who operated a cross-border iPhone resale scheme, US prosecutors say.
As first reported by The Oregonian, two men visiting the United States on student visas, Yangyang Zhou and Quan Jiang, were major players in the scam.
The men have been accused of importing over thousands of fake iPhones from China into the US, sending these devices to the tech giant with complaints that the devices refused to work, and then receiving new, untarnished iPhones through Apple's warranty system.
Once these genuine iPhones were in their hands, Zhou and Jiang would then ship these mobile devices abroad for a cut of the profit.
The scam began in April 2017 and shipments of 20 to 30 iPhones were received at a time. The knockoff iPhones would then be submitted individually -- either in person or online -- to Apple's warranty program.
In total, Jiang was connected to 3,069 iPhone warranty claims. Not every claim proved successful as counterfeit goods if detected by Apple staff would be rejected, but just under 1,500 devices were still replaced -- likely due to staff inability to recognize a fake device as there was no power -- and sent to an "associate" in China.
Proceeds from the scam were sent to Jiang's mother via wire transfer.
"Jiang explained that in exchange for his labor and efforts, his associate in China pays Jiang's mother, who also resides in China, who in tum deposits the proceeds into a back account that Jiang is able to access here in the United States," the prosecutor's complaint reads. "Jiang estimated that during 2017, he submitted 2,000 telephones to Apple for warranty repairs."
Customs officers began to have suspicions over shipments emblazoned with Apple logos, and by December 2017 had identified Jiang as one of the alleged smugglers.
Apple eventually sent cease-and-desist notices to Jiang when the scheme was exposed, but these were ignored.
US prosecutors estimate that the iPad and iPhone maker was scammed out of roughly $895,800. Considering modern iPhone prices range from $449 to $999+, this amount would certainly be reachable in a short time.
Both men were engineering students. Zhou studied at Oregon State University, while Jiang studied at Linn Benton Community College. Zhou and Jiang claim they did not realize the iPhones they were handling were counterfeit.
Zhou has been accused of submitting false export declarations. US prosecutors have accused Jiang of counterfeit good trafficking and wire fraud.
Given the huge businesses that today's tech giants operate, it is unsurprising that companies including Apple, Google, Microsoft, and Amazon are constantly targeted by fraudsters.
This week, it was revealed that a man from Lithuania managed to scam Facebook and Google out of $123 million through a business email compromise (BEC) campaign. The man posed as a vendor requesting payment and the companies dutifully paid the fake sums they apparently owed. In a rare twist, however, both Facebook and Google say they have been able to recover the stolen funds.