
Oregon students returned thousands of fake iPhones, costing Apple $900k - Shivetya
https://www.businesstelegraph.co.uk/2-oregon-students-returned-thousands-of-fake-iphones-costing-apple-900000-feds-say-the-olympian/
======
iFred
Apple warranty fraud is a great way to make money. I know of a guy who between
2008 and 2010 would purchase used iPod lots from Costco Electronic Hardware
Services, refurbish the water damage indicator in the headphone jack and dock,
and then try to return the iPod to one of the few Apple stores in the Seattle
area. The refurbishing method would consist of cutting tiny strips of white
wax paper, applying a little adhesive, and then sliding the paper flush down
the hole. When Apple caught onto this guys method, he would later take the
whole headphone assembly apart by using a pen knife to lift the plastic around
the headphones, pulling the jack out, and using whiteout to cover the other
end.

I went to the Apple store with this guy and felt ashamed just being around him
as he dropped off a dozen water damaged iPod Nanos, each with an appointment,
telling the guy that they were from guys in Iraq, as if that were to add some
emotional weight to getting new ones.

Nearly a decade later I found out the guy was running the same scam with the
iPhone SE by using reassembled water damaged phones or dummy phones from
China. I am guessing he didn't get caught because the scale of his operation
were a few at a time, maybe a couple hundred in a year, but not thousands over
a year.

Now that I think about it, I had let him use my Apple account for appointments
and claims, and ever since then, I have always had a bad time working with the
genius bar over things that I bring in.

~~~
kyleblarson
Generally not a wise idea to publicly admit to being an accomplice to theft.

~~~
tptacek
I don't think simply being in the room with someone committing a crime, even
knowing that's what they're doing, doesn't give you accomplice liability. I
think you have to assist or encourage. You do not generally have an
affirmative responsibility to prevent people from committing crimes.

 _edit: but see below_

~~~
munk-a
So... assisting like...

> let him use my Apple account for appointments and claims

~~~
tptacek
Yikes. I missed that.

~~~
iFred
I let them know about this way back when, email went into a void.

------
smogcutter
Many moons ago I worked at an apple store genius bar, and this was constant.
There wasn't a whole lot we could do about it unless the phones were obvious
fakes. Those we would reject, as well as ones where the serial number came up
as having been replaced a number of times.

Guys would bring in a bunch of phones at a time. They knew the apple store
drill and would make a separate appointment for each phone. It sucked, and
took time and resources away from real customers. But we couldn't broom them
without a concrete reason so they usually got at least a couple phones
replaced.

We mostly assumed the phones were stolen and were being washed for new serial
numbers, but it makes perfect sense that there are big counterfeiting
operations behind this.

~~~
Scoundreller
I think I just realized what kind of people I sold my authentic MacBook Air
case bottoms to. And case from a broken iPhone.

Edit: side note: it took a while to sell for not a lot of money. But other
than someone needing to drill out a screw and caring about how it looked
afterwards, i couldnt figure out why anyone would buy.

~~~
ska

       i couldnt figure out why anyone would buy. 
    

curious then, why were you attempting to sell?

~~~
ghusbands
Because it has value? If you have something that you don't want and someone
else wants to buy it (and there's no obvious fraud involved), it's a trivial
decision.

~~~
ska
The point was, how do you know it has value if you can't figure out why anyone
would buy it?

I was genuinely curious. A perfectly fine answer would have been "I try and
sell everything, because I don't know if it has value to someone". But failing
that, you had to have decided to try it for some reason....

------
jonfriese33
Did they just copy the article exactly and then put "\- The Olympian" at the
end of the title. Horrible.

Original source: [https://www.theolympian.com/news/nation-
world/national/artic...](https://www.theolympian.com/news/nation-
world/national/article228763654.html)

~~~
true_religion
Yes. That's how syndication works. You pay for content, then tell your end-
users where you got it from.

------
jak92
> _Apple records showed Jiang was associated (by name, email, address or
> computer) to 3,069 iPhone warranty claims_

Geeze, you'd think Apple would have some sort of internal controls?

~~~
penagwin
This is one of those things were you'd think they'd automatically flag
warranty claims for manual review after... what a few? I mean how many
individuals (non-business) ever make more then say 5 warranty claims in their
lifetime (with one company)?

~~~
themagician
In the last 10 years I've had at least a dozen warranty claims with Apple,
maybe more. Usually just one claim per machine, sometimes two. And iPhones… I
can't even keep track of that. You get two replacements with AppleCare+ and I
almost always use them both. I've probably gotten a dozen replacements on
broken iPhones alone. Not exactly 3,000+, but way more than 5. That's also not
exactly abnormal. When you see people with cracked screens and ask them why
they don't get them fixed the answer is usually, "I already used my
replacements."

I would think that, among lifetime Apple customers who purchase AppleCare the
average is actually above 5.

~~~
taborj
Those are replacement rates I haven't seen since I worked for a beer & wine
distributor. The sales guys would have issues all the time, usually after the
weekend. What kind of activities do you do that require such frequent
replacements? Or is it just faulty hardware? I suppose once a year isn't super
frequent, but still more frequent than I like from expensive equipment.

I do, however, see tons of folks with cracked iPhone screens. Makes me
chuckle; as an Android user, and one who doesn't need the latest and greatest,
my phones are nearly disposable. Crack the screen? Spend $129 on another.

~~~
penagwin
I work in phone repair.

If you're happy with your $129 phone then perfect! I'm not criticizing that at
all, and many people would also be happy with it.

I will say however that many people will be looking into higher end android
devices though, and for the Samsung series they're often over 200$ [0], while
iPhone screens are mostly under 30$ [1]. That's for our store to buy the part,
before charging for labor+fees, etc. After fees you'd be looking at ~300/350
for an S8 and ~85$ for an iPhone 7/8\. Not sure what it's like with the newest
iPhones, those don't really come in often for repairs (yet).

Just pointing out that android phones are usually more expensive then iPhones
to repair. I've personally used cheaper devices and they were just too slow
for me, but it's all personal preference.

[0] One of our suppliers, [https://www.mobiledefenders.com/mobile-
parts/samsung-repair-...](https://www.mobiledefenders.com/mobile-
parts/samsung-repair-parts/galaxy-s-series.html?part_type=335) [1]
[https://www.mobiledefenders.com/mobile-
parts/apple/iphone.ht...](https://www.mobiledefenders.com/mobile-
parts/apple/iphone.html?&part_type=335)

------
aw3c2
*Two students. Current title makes it sound like there was a widespread phenomenum.

~~~
redleggedfrog
Also, they're Chinese, not Oregonians. "Two OSU students..." would be fine.

Yes, I'm from Oregon.

~~~
cududa
Nobody is crapping on Oregon as a state dude, it’s just a pertinent piece of
the story, similar to “Florida Man”

~~~
redleggedfrog
We're sensitive about these things. It's difficult living in the shadow of
California.

------
cwkoss
Were all/any of the phones Jiang returned actually counterfeit?

Nothing in the article seems to definitively identify them as counterfeit. If
their determination is truly based on:

> "but which appeared to be counterfeit based on shipping methods and
> packaging"

Seems like Jiang has a pretty solid defense. Maybe all the phones were real
iPhones, but were owned by people who can't/won't do a return through apple
themselves.

------
altmind
Can somebody explain what is 'Wire fraud' and if this charge can be applied to
almost any activity done with electronic device?

~~~
Bluestrike2
The elements of wire fraud, per the DOJ criminal resource manual:

> The elements of wire fraud under Section 1343 directly parallel those of the
> mail fraud statute, but require the use of an interstate telephone call or
> electronic communication made in furtherance of the scheme. United States v.
> Briscoe, 65 F.3d 576, 583 (7th Cir. 1995) (citing United States v. Ames
> Sintering Co., 927 F.2d 232, 234 (6th Cir. 1990) (per curiam)); United
> States v. Frey, 42 F.3d 795, 797 (3d Cir. 1994) (wire fraud is identical to
> mail fraud statute except that it speaks of communications transmitted by
> wire); see also, e.g., United States v. Profit, 49 F.3d 404, 406 n. 1 (8th
> Cir.) (the four essential elements of the crime of wire fraud are: (1) that
> the defendant voluntarily and intentionally devised or participated in a
> scheme to defraud another out of money; (2) that the defendant did so with
> the intent to defraud; (3) that it was reasonably foreseeable that
> interstate wire communications would be used; and (4) that interstate wire
> communications were in fact used) (citing Manual of Model Criminal Jury
> Instructions for the District Courts of the Eighth Circuit 6.18.1341 (West
> 1994)), cert. denied, 115 S.Ct. 2289 (1995); United States v. Hanson, 41
> F.3d 580, 583 (10th Cir. 1994) (two elements comprise the crime of wire
> fraud: (1) a scheme or artifice to defraud; and (2) use of interstate wire
> communication to facilitate that scheme); United States v. Faulkner, 17 F.3d
> 745, 771 (5th Cir. 1994) (essential elements of wire fraud are: (1) a scheme
> to defraud and (2) the use of, or causing the use of, interstate wire
> communications to execute the scheme), cert. denied, 115 S.Ct. 193 (1995);
> United States v. Cassiere, 4 F.3d 1006 (1st Cir. 1993) (to prove wire fraud
> government must show (1) scheme to defraud by means of false pretenses, (2)
> defendant's knowing and willful participation in scheme with intent to
> defraud, and (3) use of interstate wire communications in furtherance of
> scheme); United States v. Maxwell, 920 F.2d 1028, 1035 (D.C. Cir. 1990)
> ("Wire fraud requires proof of (1) a scheme to defraud; and (2) the use of
> an interstate wire communication to further the scheme.").

It's a fairly broad statute, but to answer your question, it depends on
whether the "activity" in question meets all of the elements of wire fraud.

[https://www.justice.gov/jm/criminal-resource-
manual-941-18-u...](https://www.justice.gov/jm/criminal-resource-
manual-941-18-usc-1343-elements-wire-fraud)

[https://www.justia.com/criminal/offenses/white-collar-
crimes...](https://www.justia.com/criminal/offenses/white-collar-
crimes/fraud/wire-fraud/)

~~~
caymanjim
Laws like this drive me nuts. Why isn't it simply fraud, full stop? Degrees of
fraud are fine, depending on the egregiousness of the fraud. Special cases for
the type of harm are fine (fraudulent phone vs fraudulent life-saving
medication). Why the hell do we need "mail fraud" and "wire fraud"? It's just
noise.

~~~
dragonwriter
> Why the hell do we need "mail fraud" and "wire fraud"?

Mail fraud and wire fraud are federal crimes where the federal Constitutional
power justifying federal law is the postal authority and the interstate
commerce clause via the national character of the covered telecommunication
networks, respectively.

The US federal government has no Constitutional authority for a general fraud
law.

That aside, there are various ways specialized domains create risks of
particular conduct that might carry the same general problem as fraud in
general, but where the context makes it important to define the prohibited
conduct differently than is appropriate for general fraud laws.

------
rootusrootus
Okay, I'm probably over-sensitive since I am an Oregonian, but 1) it was just
two students, and 2) they were Chinese nationals.

~~~
cududa
It has nothing to do with Oregon

------
dman
Dont phones have serial numbers which are attached to apple ids? Why could
apple not implement some reporting based on device serial number or apple id?

~~~
jsgo
It's probably a public perception thing: from my experience and a lot of other
anecdotes, they're incredibly accommodating with the service and replacement
programs. The Verge or Engadget would have a near annual article about "iPhone
[2-3 generations ago] still under AppleCare being replaced with iPhone [more
recent generation]."

Yeah, losing out to counterfeiting stinks, but I think they prefer the
perception of being customer service centered. Probably worth more to them
than the losses it generates.

~~~
gowld
They have to do that to balance out the bad press of "you're holding it wrong"
when there's a mass design defect.

------
reasonablemann
Chump change compared to what was going on in China:
[https://appleinsider.com/articles/18/10/09/rampant-
chinese-i...](https://appleinsider.com/articles/18/10/09/rampant-chinese-
iphone-repair-fraud-forced-apple-to-develop-countermeasures)

------
dgzl
> Zhou and Jiang were living in Corvallis, Oregon, on student visas to study
> engineering — Zhou at Oregon Sciences University, Jiang at Linn Benton
> Community College, court documents said.

Not sure if it's been posted yet, but I'm 99% sure this is a typo. Oregon
State University is what they meant.

------
IronWolve
Reminds me of a scammer at work in the 90s (attws). She was ordering base
stations 2 at a time, deploy 1, sell one. She made a couple million but kept
going until someone noticed she should have a stock of base stations.

------
nolawi89
wow thousands- if he was just to do like 12 a year he would have stayed under
and have some income.. i guess even if he gets half.. its a few thousand a
year

------
wuxb
Blaming China--Is it a norm now? whatever the problem is, please blame China,
Trump, and maybe some alien civilization?

------
okko12
Do you still remember the iPhone Slow Down Scandal? How much does it cost
customer?

------
lamarpye
Seems like a solid business plan; better than Lyft or Uber.

------
unquietcode
Sure, but just for reference...

This: $900,000

AAPL: $922,780,000,000

I think they'll be OK.

~~~
lowlevel
Apple was losing billions in China. While this is just some of the phones
trickling into other markets for replacement, it's still fraud and hurting
Apple. This is why recently they've started to say iPhone exchanges had to be
sent to depot rather than just replaced on the spot.

------
Miner49er
Isn't it possible they didn't know the phones were fake? If the fakes are so
good that even Apple can't tell, then it's possible they thought they were
real. Maybe they thought they were buying genuine iPhones for cheap since they
were broke and having Apple send replacements to make a profit? Or am I
missing something?

~~~
rasz
They werent fake, they were "unauthorized", as fake as _original_ Apple
batteries and screens being seized by customs because they bear Apple logo.

How the scam works - Apple sends their junk to China to remanufacture/recycle.
There instead of being ground into a fine dust some end up in chinese panties
to be smuggled out of the facility. Next someone pulls out most profitable
still working parts, puts the phone back together and tries to pass it thru
warranty process again: [https://appleinsider.com/articles/18/10/09/rampant-
chinese-i...](https://appleinsider.com/articles/18/10/09/rampant-chinese-
iphone-repair-fraud-forced-apple-to-develop-countermeasures) Apparently they
managed to get a grip on Chinese fraud, so scammers moved operation into US.

There is no such thing as Genius at the "genius" bar, they arent allowed to
repair anything (can only sent it up the chain to Texas afair) and often dont
even know how to open products, not to mention being able to tell what should
be inside.

~~~
Scoundreller
I think Apple just shreds. No harvesting and re-marketing of spare parts,
unless its for their own internal repairs.

It's why I have been able to harvest my old units for parts and cover a
substantial cost of each upgrade. I even sold a completely broken iphone 7
mainboard for $40, without fingerprint reader. I literally found the phone
smashed to pieces on the ground (with SIM removed).

~~~
rasz
Replacement phones are refurbs - previously returned broken phones with
trivial defects, fixed in US using parts re manufactured(motherboards) in
China.

------
pojntfx
The fact that we choose to blame broke students instead of the multinational
corporation that uses child labor for almost everything is kinda telling.

~~~
rdtsc
> The fact that we choose to blame broke students instead of the multinational
> corporation that uses child labor for almost everything is kinda telling

Broke students, who, seemingly managed to buy 3000+ Apple phones and return
them? That's some terrible luck they had :-)

~~~
closetohome
And I've never met a poor Chinese (national) student. If they can afford to go
to school in the US, their family is generally doing alright.

