FBI arrests 14 in connection to $6 million counterfeit iPhone scam
The 76-count DoJ indictment lists 17 defendants, but three are still being soughtBy Cal Jeffrey
Busted: The United States Department of Justice has indicted 17 people involved in a massive counterfeiting scheme. The group allegedly scammed Apple out of $6.1 million by exchanging more than 10,000 fake Chinese iPhones and iPads for real ones in Apple Stores in the US and Canada.
On Wednesday, the DoJ unsealed a 76-count indictment against the defendants. The charges include fraud, conspiracy, identity theft, and money laundering, among others.
The Federal Bureau of Investigation conducted raids on two businesses and five homes involved in the criminal enterprise. More than $250,000 in cash and about 90 iPhones were seized according to the DoJ press release. The devices are being analyzed to determine if they are fake. 14 of the 17 defendants listed in the DoJ indictment were apprehended.
Three brothers from China are alleged to have been the ringleaders in the scam. Zhiwei "Allen" Loop Liao, Zhimin "Jimmy" Liao and Zhiting "Tim" Liao were arrested in San Diego during the raids as were their wives and 11 other defendants.
Three other suspects were named in the charges and are still at large. Chia "Charley" Ming, is believed to be in the San Diego area, Hyo "Will" Weon Yang might be in San Francisco, and Xiaomin Zhong, the team's alleged counterfeit supplier is likely in China.
FBI Special Agent in Charge Scott Brunner was happy that the bust went smoothly, saying in a statement:
"This significant investigation and the indictment of these 14 individuals shows the FBI's commitment to working with the United States Attorney's Office and our law enforcement partners to combat international fraud schemes that affect American citizens and American businesses against counterfeit goods originating in China and those fraudsters who exploit American trademarked products for their personal financial gain."
The two raided businesses were run by two of the brothers. One was a restoration service, and the other was a nail salon. Both had an iPhone "repair" service in the same building, which served as fronts for the counterfeiting scheme.
The way that the scam worked was the bogus iPhones and iPads were made and sent over from China. The devices were rigged to match the serial numbers and International Mobile Equipment Identity (IMEI) numbers of real phones still under warranty already in use by customers. Investigators are still trying to figure out how the scammers were getting those device-specific identifiers.
After the iPhones and iPads were rendered nonfunctional, runners would take them to Apple Stores all over North America and exchange them for the real deal. The team carried out the scheme in 40 US states and some locations in Canada. However, the ruse did not always work.
One text message from a mule to one of the brothers said that the store had rejected their attempt to exchange because the devices "look so fake." Despite the rejections, the team was still able to offload at least 10,000 bogus iPhones and iPads netting about $6.1 million selling them on the grey market.
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