Federal prosecutors this week accused two college students of scamming Apple out of $900,000 by allegedly importing counterfeit iPhones and exchanging them for legitimate ones.
According to court documents, Yangyang Zhou and Quan Jiang are accused of importing thousands of counterfeit iPhones from China and filing warranty complaints with Apple, which then replaced the knock-off devices with real models, NPR reported Friday.
The two men, who were engineering students in the U.S. at the time, allegedly claimed the smartphones were broken and would not turn on. Court documents say that Apple then replaced the devices with genuine iPhones — typically new — which would then be shipped back to China and resold for a profit, NPR reported.
The duo allegedly orchestrated the scheme between April 2017 and March 2018, prosecutors said in a criminal complaint filed in Portland, Ore. According to NPR, prosecutors said the men received a portion of profits after attempting to switch more than 3,000 iPhones.
Apple told investigators that it replaced 1,493 of the phones with warranty claims linked to Jiang and/or Zhou and took a loss of about $600 per phone, a company official told a Homeland Security agent. The company estimates that it lost $895,800.
Jiang faces trafficking in counterfeit goods and wire fraud charges. Zhou is being charged with "submitting false or misleading information on export declaration," the outlet reported.
Jiang reportedly admitted to authorities that an "associate" in China sent him 20 to 30 fake phones at a time and said he used friends — some of whom he reportedly paid — and aliases to receive them from China. According to the complaint reported by NPR, Jiang said he knowingly coordinated the shipments to come to different U.S. addresses in order to avoid raising red flags to Customs and Border Protection agents.
According to an affidavit, Jiang and Zhou deny knowing that the iPhones they were shipped and submitted to Apple for repairs or exchange were counterfeit, or that they were told by Apple that they were engaging in fraud.
Apple's lawyers, however, said the company sent two letters in 2017 to Jiang at Zhou's address, according to court filings. NPR reported that Apple's legal counsel placed him "on notice that he was importing counterfeit Apple products."
The Hill has reached out to Apple for comment.