Man Who Tricked Apple into Replacing 1,500 Fake iPhones Pleads Guilty to Trafficking Counterfeit Goods

[MacRumors]

A Chinese man on Wednesday pleaded guilty in Oregon to one count of trafficking in counterfeit goods, after he managed to trick Apple into replacing hundreds of fake iPhones with authentic handsets through its warranty program (via Bloomberg).

Quan Jiang, 30, a former engineering student at a community college in Albany, Oregon, sent around 3,000 counterfeit devices to Apple, via one of the state's three Apple stores or online. Jiang used fake names and claimed the iPhones wouldn't turn on and should be replaced under warranty.

Apple replaced almost 1,500 of the fake handsets with authentic iPhones, each with an approximate resale value of $600 on the Chinese market, where counterfeit Apple products are a big problem.

Apple only realized something was afoot as early as June 30, 2017, when its legal counsel sent Jiang a "cease and desist" letter to an address in Corvallis where 150 of the warranty claims had originated.

Apple's lawyers said that's when the company knew he was importing counterfeit Apple products, according to comments made by Homeland Security Investigations Special Agent Thomas Duffy in a court document.

"Submission of an iPhone that will not power on is critical to perpetuating iPhone warranty fraud, as the phone will not be able to be immediately examined or repaired by Apple technicians, triggering the Apple iPhone replacement process as part of its product warranty policy," Duffy wrote, quoting Apple brand protection representative Adrian Punderson.

According to the U.S. Attorney's Office for the District of Oregon, between January 2016 and February 2018, Jiang was the recipient of multiple packages containing as many as 20 to 30 inoperable, counterfeit iPhones from partners in Hong Kong.

After delivering the genuine replacements, Jiang's associate would pay Jiang's mother, who lives in China, who would then deposit the money into Jiang's bank account.

Apple is said to have rejected 1,576 warranty claims associated with Jiang, but the 1,493 claims that resulted in replacement iPhones being delivered by Apple represented an $895,000 loss to the company, according to court documents.

Jiang will be sentenced on August 28 and faces a maximum sentence of 10 years in prison, a $2 million fine or twice his proceeds, whichever is greater. Bloomberg reports that the U.S. Attorney's office will recommend a prison sentence of three years and at least $200,000 in restitution to Apple, under a plea agreement, provided Jiang also forfeits his 2015 Mercedes-Benz CLA 250 coupe.

Article Link: Man Who Tricked Apple into Replacing 1,500 Fake iPhones Pleads Guilty to Trafficking Counterfeit Goods

 

[Stiss]

Enjoy jail.

 

[BigBoy2018]

I still dont get how one guy did it 1500 times before Apple caught on.

 

[NoFace1006]

I still dont get how one guy did it 1500 times before Apple caught on.

Did you not read the article? The guy gave fake names and probably fake addresses, so Apple likely recognised him as a different customer each time.

 

[anthdci]

surely they all had different serial numbers which were checked for the warranty? Where did he get them all from?

 

[tirk]

Did you not read the article? The guy gave fake names and probably fake addresses, so Apple likely recognised him as a different customer each time.

But 150 of the claims were from the same address. Seems a big oversight to miss that!

 

[az431]

surely they all had different serial numbers which were checked for the warranty? Where did he get them all from?

Wow. Seems like not reading articles is the norm these days.
[doublepost=1558610079][/doublepost]

But 150 of the claims were from the same address. Seems a big oversight to miss that!

They didn’t. He’s in jail. Read the article.

And just FYI, there are businesses that own tens of thousands of iOS devices. Hundreds of warranty claims from one address is not unusual.

 

[69Mustang]

surely they all had different serial numbers which were checked for the warranty? Where did he get them all from?

The serial information was electronic. Key to the fraud was the phones inability to turn on. Not being able to turn on triggered the warranty replacement process.

 

[pppx3]

But 150 of the claims were from the same address. Seems a big oversight to miss that!

I'd be guessing that the replacement claims would have triggered alarm bells very early on, but Apple legal would be waiting... until it becomes large enough and serious enough to follow up.

 

[cfurlin]

Wow. Seems like not reading articles is the norm these days.
[doublepost=1558610079][/doublepost]

They didn’t. He’s in jail. Read the article.

And just FYI, there are businesses that own tens of thousands of iOS devices. Hundreds of warranty claims from one address is not unusual.

Why does that matter when you have a chance to bash Apple?

 

[BigBoy2018]

Did you not read the article? The guy gave fake names and probably fake addresses, so Apple likely recognised him as a different customer each time.

So? All you need to do is make up a bunch of fake names to trick Apple out of a million dollars.
Trust me, apple has changed their due diligence now and pulling a scam like this wont be possible again.
It shouldnt have been possible the first time around.

 

[multipasser]

But those iphone were 'fake'? So they are 100% copy in hardware? wtf

 

[-DMN-]

He should of just waited for the Xr to go on sale!!

 

[velocityg4]

What I don't get is how Apple didn't realize the IMEI or serial numbers were fake? Did they have some way of generating them so that Apple would see the device as under warranty.

 

[Edsel]

"U.S. Attorney's office will recommend a prison sentence of three years and at least $200,000 in restitution to Apple, under a plea agreement...."

If this is a loss of $895k to Apple, and our govt. is asking for only $200k returned, AND that he serves only 3 years in a U.S. jail, then I'd say Quan still profited by his scheme. If they had arranged jail time in the notorious Qincheng Prison, Beijing then it would be an equitable sentence.

 

[RogerWilco]

Angela Ahrendts tricked Apple out of a $70MM dollar signing bonus.

 

[NufSaid]

He must REALLY love that car if that is part of the punishment.

 

[69Mustang]

What I don't get is how Apple didn't realize the IMEI or serial numbers were fake? Did they have some way of generating them so that Apple would see the device as under warranty.

It seems people are overlooking this tidbit from the article:
"Submission of an iPhone that will not power on is critical to perpetuating iPhone warranty fraud, as the phone will not be able to be immediately examined or repaired by Apple technicians, triggering the Apple iPhone replacement process as part of its product warranty policy," Duffy wrote, quoting Apple brand protection representative Adrian Punderson."

 

[TheFluffyDuck]

Genius barred for 10 years

 

[YaBe]

I think it is more disturbing Apple did not discovered they were counterfit... i mean 1500?

Did you not read the article? The guy gave fake names and probably fake addresses, so Apple likely recognised him as a different customer each time.

Still they cannot spot a fake? i mean 1500???

 

[shaunp]

1500 is some going. You would have think Apple's processes would have picked this up at 2-3 phones so 1500 deserves some kind of respect even if it is illegal and morally wrong.

 

[NovemberWhiskey]

From the original article, not all of the iPhones were counterfeit. Some were, and some were not.

What the guy was doing was buying large pallets of phones from China. And bringing them in for warranty exchanges.

That's why many were approved: because they were legitimate iPhones with active warranties, but we're damaged in some way to not power on.

 

[Machiz]

A Chinese man on Wednesday pleaded guilty in Oregon to one count of trafficking in counterfeit goods, after he managed to trick Apple into replacing hundreds of fake iPhones with authentic handsets through its warranty program (via Bloomberg).

Quan Jiang, 30, a former engineering student at a community college in Albany, Oregon, sent around 3,000 counterfeit devices to Apple, via one of the state's three Apple stores or online. Jiang used fake names and claimed the iPhones wouldn't turn on and should be replaced under warranty.

Apple replaced almost 1,500 of the fake handsets with authentic iPhones, each with an approximate resale value of $600 on the Chinese market, where counterfeit Apple products are a big problem.

Apple only realized something was afoot as early as June 30, 2017, when its legal counsel sent Jiang a "cease and desist" letter to an address in Corvallis where 150 of the warranty claims had originated.

Apple's lawyers said that's when the company knew he was importing counterfeit Apple products, according to comments made by Homeland Security Investigations Special Agent Thomas Duffy in a court document.
According to the U.S. Attorney's Office for the District of Oregon, between January 2016 and February 2018, Jiang was the recipient of multiple packages containing as many as 20 to 30 inoperable, counterfeit iPhones from partners in Hong Kong.

After delivering the genuine replacements, Jiang's associate would pay Jiang's mother, who lives in China, who would then deposit the money into Jiang's bank account.

Apple is said to have rejected 1,576 warranty claims associated with Jiang, but the 1,493 claims that resulted in replacement iPhones being delivered by Apple represented an $895,000 loss to the company, according to court documents.

Jiang will be sentenced on August 28 and faces a maximum sentence of 10 years in prison, a $2 million fine or twice his proceeds, whichever is greater. Bloomberg reports that the U.S. Attorney's office will recommend a prison sentence of three years and at least $200,000 in restitution to Apple, under a plea agreement, provided Jiang also forfeits his 2015 Mercedes-Benz CLA 250 coupe.

Article Link: Man Who Tricked Apple into Replacing 1,500 Fake iPhones Pleads Guilty to Trafficking Counterfeit Goods

I think a good way to think about the punishment is to run a cost/benefit analysis. What was his NET, minus $200k, minus Mercedes, devided by three years in American Prison. For some people, that is a good deal and they would take it even knowing they would be caught. Cost of doing (illegal) business. The punishment has to make the risk not worth it.

 

[itsmilo]

Apple isn’t asking for the original invoice when you make a warranty claims to cross check it with their database?

 

[BigBoy2018]

Angela Ahrendts tricked Apple out of a $70MM dollar signing bonus.

Best. Post. Of. The. Year. (So. Far.)