Man Who Duped Apple into Replacing Fake iPhones for Authentic Devices Worth $1 Million Convicted and Sentenced

[MacRumors]

A man has been sentenced to 26 months time served in prison for his involvement in a conspiracy to defraud Apple out of more than $1 million by tricking the company into replacing hundreds of fake iPhones with authentic handsets through its warranty program.

Haiteng Wu, 32, a Chinese engineering post-graduate residing in McLean, Virginia, immigrated to the United States in 2013 and secured lawful employment, before embarking on the roughly three-and-a-half-year-long scheme to defraud Apple.

As part of the scheme, Wu and other conspirators received multiple packages containing hundreds of inoperable, counterfeit iPhones from partners in Hong Kong. The phones contained spoofed IMEI numbers and serial numbers that corresponded with authentic in-warranty iPhones.

Using fake names, the conspirators then returned the inauthentic phones to Apple, claiming the "iPhones" no longer worked and should be replaced under warranty. Apple replaced the fake handsets with authentic iPhones, and Wu then shipped back the fraudulently obtained devices to conspirators overseas, including Hong Kong.

Wu recruited others, including his wife, Jiahong Cai, and Teang Liu to participate in the conspiracy, and also procured fake identification documents, used aliases, and opened multiple commercial mail receiving agency mailboxes.

In total, Wu acknowledged defrauding Apple out of nearly $1 million and intending to defraud the company out of even more money. Wu and his conspirators were arrested in December 2019, and Wu has been in custody since.

Wu pleaded guilty in May 2020 to one count of conspiracy to commit mail fraud. On Tuesday, Judge Emmet G. Sullivan sentenced Wu to the time he had already served in custody and ordered him to pay $987,000 in restitution and an identical amount in a forfeiture money judgement.

Like her husband, Cai pleaded guilty to mail fraud, and the judge sentenced her to over five months time served following her guilty plea. Liu also pleaded guilty to the same offense and will be sentenced next month. The case was investigated by the U.S. Department of Homeland Security, Homeland Security Investigations, and the U.S. Postal Inspection Service.

This isn't the first time Apple has been duped into replacing hundreds of fake iPhones with authentic handsets through its warranty program. In 2019, Chinese engineering student Quan Jiang was sentenced to three years and one month of imprisonment by a US district judge after he was found guilty of scamming Apple in the same manner, also to the tune of $1 million.

Article Link: Man Who Duped Apple into Replacing Fake iPhones for Authentic Devices Worth $1 Million Convicted and Sentenced

 

[yellow8]

Busted!
He tried, he lost.

 

[Reggaenald]

How many phones must they have faked and gotten from Apple for $1.000.000? That’s impressive. They were very smart, but not smart enough to stop. In the end arrogance, ignorance and thirst for more and more ??? tightened their nooses.
I wonder if they had more motivation than just $.

 

[Davidglenn]

A few years ago a friend of mine from China dropped and broke the screen of his iPhone. He took it in to be repaired and Apple said it would take two weeks as they had to verify the phone.

These scammers have made it harder for honest legitimate customers to get fast service. Also, Apple would have increased the costs of products to cover the scammers. So everyone loses out.

 

[Tripps9000]

Wow people never learn I guess getting a job and earn money the right way is dead now

 

[Damian83]

If apple is so rich to replace iphones without even opening the broken ones then it deserves to be scammed. Anyway why HANDSETS??? Who the hell uses this word when talking of smartphones??? I had to google to know what the hell is a handset and results are:

i think the scammed one was the chinese guy ?

 

[arobert3434]

Let me make sure I have this straight. The guy sends fake iPhones to Apple asking "Please replace this, it's broken," and they just take it and, robot-like, send out real iPhones in return? It takes a year to go by and a thousand phones before they realize they're being had? (And somehow I'm suspecting it wasn't even Apple that realized, rather the real owner of one of those serial numbers legitimately needing to get his phone repaired and then being told by Apple, "It's already been sent to us," clued them in.) Is this Tim Cook at work, squeezing every dollar out of the support costs to maximize lifetime profit per device sold?

 

[imdropbear]

Let me make sure I have this straight. The guy sends fake iPhones to Apple asking "Please replace this, it's broken," and they just take it and, robot-like, send out real iPhones in return? It takes a year to go by and a thousand phones before they realize they're being had? (And somehow I'm suspecting it wasn't even Apple that realized, rather the real owner of one of those serial numbers legitimately needing to get his phone repaired and then being told by Apple, "It's already been sent to us," clued them in.) Is this Tim Cook at work, squeezing every dollar out of the support costs to maximize lifetime profit per device sold?

That's probably what happened. It's not surprising to me that Apple didn't notice, the guys who handle returns probably don't have the time nor do they care since they are probably not paid very well anyway. If the fakes looked authentic enough and had "real" IMEI numbers, how would they notice?

They probably did notice it on multiple occasions when a customer wanted to return the real phone the IMEI belonged to, but to notice it is a scheme (they used different names and probably different locations) probably took a while.

 

[laptech]

I wonder if Apple noticed this scam early on but let it carry on because law enforcement wanted to catch everyone involved, buyers, sellers, those that provided the fake phones, the false serial numbers and the false IMEI numbers, distributors and those in China as well.

 

[MVMNT]

It's not a conspiracy if he was actually doing it. It's an operation.

 

[Krizoitz]

How many phones must they have faked and gotten from Apple for $1.000.000? That’s impressive. They were very smart, but not smart enough to stop. In the end arrogance, ignorance and thirst for more and more ??? tightened their nooses.
I wonder if they had more motivation than just $.

Let’s assume a value of $500 per phone (obviously they’ve gotten more expensive over time, but let’s start low).

$1,000,000 / $500 = 2,000 phones. (you use commas not periods to separate thousands places in English). It might be less if they used higher value phones, but even 2,000 is not that hard to turn over given the 3.5 years they were at it. With 3 known conspirators and 3.5 years your down to about 190 phones per year per person, or 16 a month.

 

[DesertNomad]

I'm surprised they are not being deported. It does not indicate if they are a US citizen or still on a green card, but when I lived overseas, had I done something like this, I would surely have been deported after serving time.

 

[newyorksole]

Bruh this guy probably came to my store when I worked in Apple Retail.

There were a LOT of customers trying this. Bringing bricked phones to have them swapped. Some got through, some didn’t. Not that it REALLY matters, but a lot of them were Chinese.

They had quite the operation. The technicians started flagging the repairs.

 

[Adarna]

Bruh this guy probably came to my store when I worked in Apple Retail.

There were a LOT of customers trying this. Bringing bricked phones to have them swapped. Some got through, some didn’t. Not that it REALLY matters, but a lot of them were Chinese.

They had quite the operation. The technicians started flagging the repairs.

Thank you for chiming in.

Those that participated were blood relatives, neighbors or a friend's friend who was looking for a side hustle. An American who never saw an ocean much less interacted much with Asians will not understand this familial connection.

News of this sort of fraud started in the 1st decade of the iPhone and was reported as early as 2013.

I know this because I've been reading on news about all things Apple since 2000.

Somewhat related, Apple HK used to be market outside of the US that had the highest sales of iPhones where in Chinese people were paid to line up outside of Apple Store & authorized Apple resellers to get around the 1-2 iPhone per customer limitation to collectively buy hundreds of iPhones for grey market export back to red China and countries like the Philippines that get their launches 3-4 months later nearing Christmas.

Why do they do this? Because of gaming the system to be able to sell the cheapest iPhones on the planet in markets that charge exuberant import duties, sales tax, GST & VAT.

After many years of complaints from Apple's partners in countries like the Philippines the launch of iPhones were moved up from nearly Christmas to 4 weeks after US launch. This only gave grey market sellers less than 5 weeks to liquidate inventory.

Apple does not disclose this loophole in US consumer laws so it does not help popularize this criminal act any further and hit their stock price unfairly.

Think of how RIAA & MPAA press releases about the Pirate Bay just made that website much more popular globally.

A cheaper solution to this would have them buying the Pirate Bay out.

 

[mikethemartian]

A man has been sentenced to 26 months time served in prison for his involvement in a conspiracy to defraud Apple out of more than $1 million by tricking the company into replacing hundreds of fake iPhones with authentic handsets through its warranty program.

Haiteng Wu, 32, a Chinese engineering post-graduate residing in McLean, Virginia, immigrated to the United States in 2013 and secured lawful employment, before embarking on the roughly three-and-a-half-year-long scheme to defraud Apple.

As part of the scheme, Wu and other conspirators received multiple packages containing hundreds of inoperable, counterfeit iPhones from partners in Hong Kong. The phones contained spoofed IMEI numbers and serial numbers that corresponded with authentic in-warranty iPhones.

Using fake names, the conspirators then returned the inauthentic phones to Apple, claiming the "iPhones" no longer worked and should be replaced under warranty. Apple replaced the fake handsets with authentic iPhones, and Wu then shipped back the fraudulently obtained devices to conspirators overseas, including Hong Kong.

Wu recruited others, including his wife, Jiahong Cai, and Teang Liu to participate in the conspiracy, and also procured fake identification documents, used aliases, and opened multiple commercial mail receiving agency mailboxes.

In total, Wu acknowledged defrauding Apple out of nearly $1 million and intending to defraud the company out of even more money. Wu and his conspirators were arrested in December 2019, and Wu has been in custody since.

Wu pleaded guilty in May 2020 to one count of conspiracy to commit mail fraud. On Tuesday, Judge Emmet G. Sullivan sentenced Wu to the time he had already served in custody and ordered him to pay $987,000 in restitution and an identical amount in a forfeiture money judgement.

Like her husband, Cai pleaded guilty to mail fraud, and the judge sentenced her to over five months time served following her guilty plea. Liu also pleaded guilty to the same offense and will be sentenced next month. The case was investigated by the U.S. Department of Homeland Security, Homeland Security Investigations, and the U.S. Postal Inspection Service.

This isn't the first time Apple has been duped into replacing hundreds of fake iPhones with authentic handsets through its warranty program. In 2019, Chinese engineering student Quan Jiang was sentenced to three years and one month of imprisonment by a US district judge after he was found guilty of scamming Apple in the same manner, also to the tune of $1 million.

Article Link: Man Who Duped Apple into Replacing Fake iPhones for Authentic Devices Worth $1 Million Convicted and Sentenced

The people at Apple that exchange the phones can’t tell the difference between a real iPhone and a counterfeit one?

 

[SPUY767]

Ha! Does indeed seem like quite a bit of work for, relatively speaking, little money. Given how many people he had to compromise to pull off this scheme, it was destined to failure.

 

[SPUY767]

The people at Apple that exchange the phones can’t tell the difference between a real iPhone and a counterfeit one?

Sounds like these were real, albeit non-functional, iPhones stolen from the supply chain.

 

[JM]

The people at Apple that exchange the phones can’t tell the difference between a real iPhone and a counterfeit one?

I would imagine that after persistence an Apple associate would cave in to a phone exchange that their little “checker device” said wasn’t valid, just so that they could deliver excellent customer service.

In other words, Apple has a reputation for excellent customer service, and rather than potentially denying a valid exchange and suffering the bad mouthing, the associate chooses to do it; even if their little device checker device tells them it’s bunk.

 

[sparkinstx]

I'm surprised they are not being deported. It does not indicate if they are a US citizen or still on a green card, but when I lived overseas, had I done something like this, I would surely have been deported after serving time.

According to the DOJ news release, they're Chinese nationals, so at some point they'll be deported.

 

[sparkinstx]

I would imagine that after persistence an Apple associate would cave in to a phone exchange that their little “checker device” said wasn’t valid, just so that they could deliver excellent customer service.

In other words, Apple has a reputation for excellent customer service, and rather than potentially denying a valid exchange and suffering the bad mouthing, the associate chooses to do it; even if their little device checker device tells them it’s bunk.

Also, the phones had real (but spoofed) serial numbers and IMEIs, so they checked out as "genuine". If they wouldn't turn on, they might've just assumed they were bricked. Those must have been some quality fakes. An awful lot of effort to scam Apple. I wonder what the real replacement phones shipped out of the country sold for?

 

[44267547]

Eventually knew he had to get caught, right? This was quite the heist, but at some point, he should’ve scaled back or changed his method of operation. There’s just no way with something this ‘Grand in scheme’, are you going to walk away without having multiple law-enforcement agencies pursuing you.

 

[TheYayAreaLiving 🎗️]

Only 26 months in prison after defrauding Apple by 1 million? It seems like he’s getting away with it easily.

 

[svish]

Justice is served!

 

[bluespark]

Only 26 months in prison after defrauding Apple by 1 million? It seems like he’s getting away with it easily.

Per the article, the court also "ordered him to pay $987,000 in restitution and an identical amount in a forfeiture money judgement." Apple is entitled to no more than the restitution, so the nearly $1M in addition compensates the state for its expenses in imprisoning him previously. Sounds about right to me -- he's out much more than what he gained, and he spent enough time in prison that the experience would achieve any deterrence effect that a longer sentence would serve.

 

[HiVolt]

So they arrest this guy, but let violent criminals out on bail, or no bail...

How ironic eh?