How phony iPhones duped Apple

How were two students allegedly able to dupe Apple out of almost a million dollars by sending the company thousands of fake iPhones and getting them exchanged for genuine ones?

I've seen a few fake iPhones, and while from afar (and I wasn't paying that much attention) they might pass as the real thing, even a superficial inspection swiftly reveals them to be poor quality counterfeits.

So how were two students allegedly able to dupe Apple out of almost a million dollars by sending the company thousands of fake iPhones, and getting them replaced under warranty?

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Well, first things first, this scam wasn't pulled off because the fake iPhones were near perfect clones. Sure, they might have looked vaguely like iPhones, and might have run an operating system that looked like iOS, but if these iPhones were, as reported, fakes (and didn't in some way make use of genuine iPhones that had been stolen or damaged), then this scam is less about the hardware and likely more about serial numbers or IMEI/MEID numbers.

Anyone who has dealt with Apple with regards to warranty knows that to Apple, the serial or IMEI/MEID number is everything. These numbers tell Apple almost everything it needs to know about a device, from its specs to when it was sold. However, one thing that it can't tell Apple is whether the hardware is genuine. 

There's a trust placed in the number that goes beyond the physical hardware.

It's interesting to note that newer iPhones don't have the serial number engraved anywhere on the device (instead it can be found in the Settings app, or on a sticker on the box it came in), but the IMEI/MEID is etched on the SIM card tray and can be used for support when the serial number can't be obtained.

This hasn't always been the case. iPhones ranging from iPhone 5 to iPhone 6 had the IMEI/MEID engraved on the back, while iPhone 3GS to iPhone 4S has the IMEI/MEID and serial number engraved on the SIM card tray.

Device serial and IMEI/MEID numbers are also associated with the owner's Apple ID.

So, it's very likely that what the alleged scammers had were genuine serial and IMEI/MEID numbers attached to fake iPhones. Apple handles a lot of warranty issues every day, and even a few thousand phony iPhones getting into the system over a year or so would be a drop in the ocean. Someone walks into an Apple Store (or online) saying claiming that their iPhone won't start. They have a genuine serial/IMEI/MEID number and hardware, so the tech support representative does their best to make things right. After all, people turning up with a broken device don't want to be made to feel like criminals, so there's an implied trust in the system.

And it seems that it was this trust that was taken advantage of.

What is interesting is that of the alleged 3,069 fake iPhones submitted for warranty replacement, less than half were replaced, with the remainder being returned because Apple engineers believed they had been "tampered" with, invalidating the warranty. It's interesting to note that none were identified by Apple as bogus devices.

If the scam revolved around using genuine serial and IMEI/MEID numbers, it raises questions about how these numbers were acquired. Were they harvested from users, or were they somehow genuine serial numbers that were passed on to the scammers from the supply chain (the criminal complaint does contain a photograph claiming to show "approximately 60 white boxes marked with Apple product SKUs and codes")? If they were harvested serial numbers, what implication did this had on the people who owned the iPhone with that identity?

This is an interesting case indeed, and it's likely that Apple – and other companies that deal with a large number of warranty claims – will learn from the mistakes made here.

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