Two scammers used 5,000 ‘fake’ iPhones to defraud Apple, here’s how

The US Attorney’s Office for the District of Columbia has found two men of Chinese origin -- Haotian Sun, a 33-year-old from Baltimore, and Pengfei Xue, a 33-year-old from Germantown Maryland – guilty of a “sophisticated scheme to

defraud

Apple out of millions of dollars’ worth of iPhones”.
In the official press release, the US Attorney’s Office has found them guilty and they could serve up to 20 years in prison with sentencing scheduled for June 21.

How it cost Apple $3 million in loss
The scam is about sending

counterfeit iPhones

for repairs and then Apple would replace it with the genuine iPhone. According to the report, Haotian Sun and Pengfei Xue, ran this operation between May 2017 and September 2019, they imported counterfeit iPhones from Hong Kong, submitted them to Apple for repair and exchanged them for genuine replacements. With spoofed serial and IMEI numbers, over 5,000 fake phones were strategically submitted to Apple stores in two years, which is expected to have caused a loss of more than $3 million which roughly translates to Rs 24 crores.

This is not the first time

scammers

have used this counterfeit iPhone repair trick to trick Apple into exchanging with a genuine iPhone. In 2017 itself, two Chinese engineering students used the same trick to scam Apple into exchanging the counterfeit iPhones for the original iPhone worth $1 million. The two are now being criminally prosecuted.
In 2019, Jiang allegedly submitted 3,069 warranty claims and Apple granted 1,493 replacement iPhones as a result. At the estimated value of $600 per phone, Apple lost nearly $900,000 from this scheme.
What is this iPhone repair scam?
As mentioned above, scammers use counterfeit iPhones and send them for repairs to Apple. In return, Apple examines the iPhones and issues a replacement for them. The trick ends up returning the scammer a genuine iPhone for each fake iPhone sent for the service.