Fraudsters tried to scam Apple out of 5,000 iPhones worth over $3 million

Two Chinese nationals face 20 years in prison after being caught and convicted of submitting over 5,000 fake iPhones worth more than $3 million to Apple with the goal of having them replaced with genuine devices.

Apple offers a one-year warranty for new iPhones, enabling customers to return malfunctioning devices to Apple or authorized resellers for a replacement. Additionally, Apple provides insurance protection plans, allowing customers to extend the warranty period beyond one year.

The company provides several methods to submit defective iPhones for repairs or replacements under its warranty service and handset replacement program.

Options include shipping the phone to Apple through United Parcel Service (UPS) free of charge, visiting an Apple retail store, or going to an Apple Authorized Service Provider.

Between July 2017 and December 2019, Haotian Sun and Pengfei Xue (and their co-conspirators Wen Jin Gao and Dian Luo) took advantage of Apple's policy to replace non-functioning counterfeit devices.

"The object of the conspiracy was for the conspirators to unjustly enrich themselves by fraudulently obtaining authentic iPhones from Apple after submitting inauthentic iPhones to Apple for repair and replacement," according to the indictment.

Fake iPhones with spoofed IMEIs and serial numbers

Throughout this multi-year scheme, they shipped counterfeit devices from Hong Kong to commercial mail receiving agency (CMRA) mailboxes in UPS stores, opened using their actual driver's licenses and university identification cards.

They then submitted the inauthentic iPhones with spoofed serial numbers and IMEI numbers to Apple retail stores and Apple Authorized Service Providers and received replacement iPhones from Apple, shipped via private and commercial interstate carriers, including FedEx, DLH, and UPS.

These replacement devices were shipped to the conspirators in Hong Kong to sell and share the illegally obtained funds between the scheme's members.

A jury convicted Sun and Xue of mail fraud and conspiracy to commit mail fraud this week. U.S. postal inspectors arrested them in December 2019.

They each face a maximum penalty of 20 years in prison and are scheduled to be sentenced on June 21, 2024.