Feds bust $900,000 iPhone repair & return scam in Oregon

Posted:
in General Discussion edited April 4
Two engineering students in Oregon are accused of bringing thousands of counterfeit iPhones to Apple and having them replaced with real ones that they then shipped to China for sale.

Apple's Bridgeport Village Store, Oregon. Some of the alleged fraud was perpetuated online but others involved visits to Oregon's three Apple Stores
Apple's Bridgeport Village Store, Oregon. Some of the alleged fraud was perpetuated online but others involved visits to Oregon's three Apple Stores


Students Yangyang Zhou and Quan Jiang, both Chinese nationals studying in Oregon, are accused of getting Apple to replace their counterfeit iPhones with real ones. Each iPhone was replaced under Apple's repair policies and the thousands of phones were then sent to China where they were sold. Apple reportedly estimates the cost of the fraud to be $895,800.

Zhou made his first court appearance at the US District Court in Portland on Friday where federal investigators from Customs and Border Protection (CBP) claimed that he and Jiang had received multiple shipments of counterfeit iPhones from China.

Boxes of fake iPhones found at suspects' homes. Source: US Attorney's Office via KION
Boxes of fake iPhones found at suspects' homes. Source: US Attorney's Office via KION


An Apple representative explained to the court how the fraud worked.

"Submission of an iPhone that will not power on is critical to perpetuating iPhone warranty fraud," said the representative, "As the phone will not be able to be immediately examined or repaired by Apple technicians, triggering the Apple phone replacement process as part of its product warranty."

According to court records as reported by The Oregonian newspaper, Apple received more than 3,000 warranty claims from Jiang and in 1,493 cases replaced his phone.

Customs and Border Protection officials began investigating in April 2017 after having seized five or more shipments of phones. In December 2017, Homeland Security interviewed Jiang who admitted regularly receiving 20 to 30 "iPhones" from China.

At the time of the alleged fraud, Zhou and Jiang were both living in Corvallis, Oregon, and were on student visas to study engineering. Jiang was studying at Linn Benton Community College and Zhou at Oregon State University.

Apple reportedly sent Jiang a cease-and-desist letter in both June and July 2017 while CBP also wrote in April and October to tell him that counterfeit phones addressed to him had been seized. Jiang denies receiving any of these letters or being told that what he was doing was illegal.

Jiang's defense lawyer has so far declined to comment but Zhou's told Portland's KOIN that his client is innocent. "Mr Zhou was not aware of any alleged counterfeiting," he said, " and we believe Mr Zhou will be vindicated."

Apple has yet to comment publicly on this case but reportedly it has been working to combat similar fraud cases for at least the last six years.
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Comments

  • Reply 1 of 40
    MacProMacPro Posts: 18,167member
    Wow, that's pretty bad that Apple technicians cannot detect a fake without powering on, or do they and this is simply a protocol error on the part of the people making the decision to send a replacement?  
    edited April 4 olsjbdragonjahblade
  • Reply 2 of 40

    Jiang denies receiving any of these letters or being told that what he was doing was illegal.
    Because anybody with half a brain would assume that taking a phone to an Apple store claiming that it's an Apple phone, when it isn't, and claiming that one bought it from Apple, when one didn't, and asking for a return because now it doesn't work is completely legal and above board. /s
    DAalsetholsn2itivguydysamoriajbdragonDanManTXleavingthebiggrandominternetpersonjahbladewatto_cobra
  • Reply 3 of 40
    "Apple reportedly sent Jiang a cease-and-desist letter in both June and July 2017 while CPB also wrote in April and October to tell him that counterfeit phones addressed to him had been seized. Jiang denies receiving any of these letters or being told that what he was doing was illegal."

    hmmm... someone has to tell you that exchanging ~4,500 (vs. 20-30 as told... lying to investigators is pretty bad, from what I hear in the news) iPhones that you got in several boxes and drove 75 miles to return (I'm guessing they didn't bring all the boxes into the store at once) multiple times, then sending them back to China is illegal?
    randominternetpersonwatto_cobra
  • Reply 4 of 40
    How does it even get to that point?
    olsjbdragonDanManTXcornchipmatteblack13
  • Reply 5 of 40
    maestro64maestro64 Posts: 4,529member
    MacPro said:
    Wow, that's pretty bad that Apple technicians cannot detect a fake without powering on, or do they and this is simply a protocol error on the part of the people making the decision to send a replacement?  
    That is because there is no serial number on the outside of the phone for the tech to verify as valid. But you would think that Apple should have known something was up with the same two people kept showing up in their system. I suspect someone on the inside since I know when I went into Apple stores and I give them my name they know my account history.
    bonobobjbdragonredgeminiparandominternetpersonmatteblack13watto_cobra
  • Reply 6 of 40
    wandersowanderso Posts: 97member
    Umm... this is weird. It actually reveals a flaw in Apple’s identification of their phones.  Unlike many other consumer products, there is no physical serial number, QR code or bar code representing one on the case of an iPhone.  If there was, repair could simply scan it and verify if the phone is authentic, who it is registered to, and under warranty.  If the scammer copies a real serial number, it could be flagged as a duplicate. Even having the serial # inside the phone would work, although then the tech has to crack it open.   The serial number can still also be contained in the software, just also have a physical one. The flaw in my suggestion comes when Apple or a 3rd party replaces the case with one that is not original, but those different number case backs could also be registered to the previously repaired phone. A 3rd party replacing the case back already voids the warranty.   Apple could also install a passive RFID tag inside the phone instead of the above suggestions with the device’s serial number. These can be scanned by the service tech before cracking it open. Don’t get paranoid, it can be a near field RFID (set the phone on a plate like when you charge an iPhone 8 or newer). 

    DanManTXphotoeditormatteblack13watto_cobra
  • Reply 7 of 40
    leighrleighr Posts: 180member
    You would have thought that after the first 1,400 phone replacements assigned to his AppleID or whatever ID was used, that Apple would have twigged. Not sure how you can return so many items without raising a red flag?
    dysamoriabonobobjbdragonredgeminipamac_dogcornchipmacseekermatteblack13watto_cobra
  • Reply 8 of 40
    lkrupplkrupp Posts: 6,969member
    Well, this kinda pops the balloon of the critics who say Apple’s warranty process is too strict and they should be more liberal in replacing phones. But, as usual, all the above posts blame Apple for not being more suspicious. It’s always Apple’s fault... ALWAYS!
    leavingthebiggrandominternetpersonDAalsethcornchipwatto_cobra
  • Reply 9 of 40
    danielchowdanielchow Posts: 119member
    Jiang's defense lawyer has so far declined to comment but Zhou's told Portland's KOIN that his client is innocent. "Mr Zhou was not aware of any alleged counterfeiting," he said, " and we believe Mr Zhou will be vindicated."

     :D Riiight and the devil didn’t know he was stealing. 

    edited April 4 jbdragonracerhomie3watto_cobra
  • Reply 10 of 40
    1st1st Posts: 348member
    look like both school they (the 2 students) attend didn't teach Law and Ethics course (engineering dept compulsory for most of the schools in this neck of the woods). 
    watto_cobra
  • Reply 11 of 40
    MacProMacPro Posts: 18,167member
    maestro64 said:
    MacPro said:
    Wow, that's pretty bad that Apple technicians cannot detect a fake without powering on, or do they and this is simply a protocol error on the part of the people making the decision to send a replacement?  
    That is because there is no serial number on the outside of the phone for the tech to verify as valid. But you would think that Apple should have known something was up with the same two people kept showing up in their system. I suspect someone on the inside since I know when I went into Apple stores and I give them my name they know my account history.
    Yes, that was something I almost suggested but backed off ... an inside accomplice.
  • Reply 12 of 40

    Jiang denies receiving any of these letters or being told that what he was doing was illegal.
    Because anybody with half a brain would assume that taking a phone to an Apple store claiming that it's an Apple phone, when it isn't, and claiming that one bought it from Apple, when one didn't, and asking for a return because now it doesn't work is completely legal and above board. /s
    But he only did it 1,493 times, it's not like he had a pattern of it or something.  I'm sure it was just an honest mistake.  /s
    n2itivguybeowulfschmidtracerhomie3randominternetpersonmac_dogmacseekermatteblack13watto_cobra
  • Reply 13 of 40
    The most surprising thing in this story is that they thought they'd be able to get away with it. Looking at the bright side for them, they won't have to worry about rent for the foreseeable future.
    macseekermatteblack13watto_cobra
  • Reply 14 of 40
    jbdragonjbdragon Posts: 2,078member
    This was clearly FRAUD. They know it. They should pay Restitution costs and be thrown into jail for a few years. Like China does after their courts screw you over as they always take their side and now you own thousands, and until you PAY UP, you can't leave the country. The same should be here. You're stuck here until you pay off what you ripped off Apple for. Any job here you have, a big chunk of it should be taken out to help pay for the money they own back to Apple. If it takes them the test of their lives, so be it.
    watto_cobra
  • Reply 15 of 40
    KuyangkohKuyangkoh Posts: 318member
    Jiang's defense lawyer has so far declined to comment but Zhou's told Portland's KOIN that his client is innocent. "Mr Zhou was not aware of any alleged counterfeiting," he said, " and we believe Mr Zhou will be vindicated."

     :D Riiight and the devil didn’t know he was stealing. 

    That Attorney must be also Chinese counterfeit ....vindicated?? Where did you graduate Mr Attorney to say that. Having that many iPhones returned?? You must be in LaLa land camping...
    watto_cobra
  • Reply 16 of 40
    tzeshantzeshan Posts: 1,945member
    wanderso said:
    Umm... this is weird. It actually reveals a flaw in Apple’s identification of their phones.  Unlike many other consumer products, there is no physical serial number, QR code or bar code representing one on the case of an iPhone.  If there was, repair could simply scan it and verify if the phone is authentic, who it is registered to, and under warranty.  If the scammer copies a real serial number, it could be flagged as a duplicate. Even having the serial # inside the phone would work, although then the tech has to crack it open.   The serial number can still also be contained in the software, just also have a physical one. The flaw in my suggestion comes when Apple or a 3rd party replaces the case with one that is not original, but those different number case backs could also be registered to the previously repaired phone. A 3rd party replacing the case back already voids the warranty.   Apple could also install a passive RFID tag inside the phone instead of the above suggestions with the device’s serial number. These can be scanned by the service tech before cracking it open. Don’t get paranoid, it can be a near field RFID (set the phone on a plate like when you charge an iPhone 8 or newer). 

    I think it can be concluded that half of Apple repair people are unqualified. Because half of the fake iPhones were denied and half were replaced. 
    randominternetperson
  • Reply 17 of 40
    BTW, the dude is a student at Oregon State University, not Oregon Sciences University (or Oregon Health & Science University).  Although in this case, I'm sure OSU would be happy to not be represented accurately.  
    watto_cobra
  • Reply 18 of 40
    macguimacgui Posts: 1,190member
     Jiang denies receiving any of these letters or being told that what he was doing was illegal.

    95% or more crooks arrested deny guilt as a matter of course, not matter how blatant they're guilt. 'It wasn't me. Maybe it was somebody who looked like me. But it wasn't me. You gonna believe me or your lyin' eyes. No that's not my gun/weed/crack. I found it and was going to turn it in to the police.'

    It's extremely rare for a crook to hold out his hands and say 'Ya got me. I did it. Put the cuffs on'. Does anybody really expect an admission of guilt, prior to a plea bargain? Only an idiot would.


    lkrupp said:
    It’s always Apple’s fault... ALWAYS!

    Well, don't they bear a large part of the responsibility? Fool me once, shame on you. Fool me twice...

    When banks or other major corporations are hacked, and it's revealed that they stored data unencrypted, failing to take some basic security precautions, do you say they have no responsibility, culpability, or liability? It was the hackers! 

    Apple got suspicious. Eventually. Somebody, somewhere at Apple should have seen this earlier. There were three Apple stores involved, but seriously... I can't use the same discount code twice without it being caught. Not that I would ever try that.

    Seriously, as Dr. S asked, how did it ever get that far? I don't think it was inside help at all. There would be no need to try multiple stores. That the phones didn't work was indeed the key, but you have do wonder didn't somebody somewhere say 'What, you—again??' We don't know that anybody ever did, as this may have been caught be some 'lowly' bean counter.

    matteblack13
  • Reply 19 of 40
    Very strange story.  I can see how Apple could get duped a couple times by these guys since they apparently have a generous replacement policy for phones that won't power on.  But one would think that the returned device would get a more thorough analysis after the fact (when that robot tries to take it apart and finds it filled with gummy bears or whatever instead of the expected components).  One would think that that would send an alert back to the Apple Store letting them know that they got duped and for Apple to flag that customer.  I suppose they did catch them after the 100th or 1000th time, but seriously?
    matteblack13
  • Reply 20 of 40
    sflocalsflocal Posts: 4,548member
    So either his client is lying to him, or the lawyer is lying to the press.  Which one is it?
    watto_cobra
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