IPhone replacement scam by college students costs Apple almost $1M

Apple'repaired thousands of fake iPhones before it smelled a scam

According to the federal government, two college students from OR was able to scam Apple allegedly out of nearly $900,000 through a scheme that involved counterfeit iPhones.

Yangyang Zhou and Quan Jiang, who were both engineering students in the USA on F-1 student visas at the time, attempted the switcheroo with 3,069 iPhones from April 2017 through March 2018, prosecutors said in a criminal complaint filed in Portland, Ore. They would send in the knockoffs for repairs or replacement, claiming they wouldn't power on.

Authorities allege the students pulled off a convoluted scheme in order to wring Apple of the cash by using counterfeit devices and exploiting Apple's return policy. Once in the USA, the devices were sent to the company for repairs or replacements. The students earned from the profits. Jiang is accused of committing wire fraud and illegally trafficking goods, while Zhou is accused of exporting goods illegally. Apparently, Apple didn't require proof of purchase to replace the phones.

Jiang and Zhao both claim they were uninformed that the original phones were fake.

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He said he was a patriot, he loves the President and that he hates radical Muslims in our government, the complaint said. He told investigators he had said "if our forefathers were still alive, they'd put a bullet in her head".

The replaced 1493 units of Apple iPhones reported cost the phone maker $895,800 which is approximately Rs 6 crore. The investigation revealed that Jiang, who took care of placing return requests with Apple, made 3,096 iPhone warranty claims. Each of those new phones was then shipped overseas and sold for a healthy profit, with a share being sent to Jiang's mother who then transferred it to Jiang's bank account. That means he could face fines of up to $US2 million ($2.8 million) or 10 years in prison, or both, on the counterfeit charge. He was put in federal custody but was later released on Global Positioning System monitoring.

The big break in the case came previous year when federal agents raided Jiang's OR residence and found over 300 counterfeit iPhones, shipping records, warranty claim submissions, and boxes addressed to Zhou, his alleged accomplice, according to the report. Apple's legal counsel said the company sent two letters in 2017 to Jiang at Zhou's address, placing him "on notice that he was importing counterfeit Apple products". They also discovered several boxes that had been addressed to Zhou, who has been named as the accomplice of Jiang.

And just last month, a Lithuanian man pled guilty to scamming Google and Facebook out of $100 million by sending them fake invoices via email and posing as a Taiwanese hardware company.

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