Apple is out hundreds of thousands of dollars after allegedly being scammed by two Chinese engineering students in Oregon.
According to a report from The Oregonian, the men, Yangyang Zhou and Quan Jiang, managed to stay under Apple’s radar as they took advantage of the company’s iPhone replacement program. In 2017, the duo allegedly purchased thousands of fake iPhones from China and smuggled them into the United States. The men then contacted Apple with the claim that the iPhones would not turn on. The fake iPhones were later sent individually to Apple and the company unknowingly replaced them with real devices.
Zhou and Jiang allegedly submitted 3,069 fake iPhones but only 1,493 were accepted and this cost the company an estimated $895,800.
Zhao was allegedly responsible for smuggling the iPhones while Jiang was tasked with sending the phones to Apple, either through its online repair program or in-person at an Apple retail store, according to the report. After the devices were replaced, the two sent them back to China to be sold for a profit. Once the phones were sold in China, an associate sent the money to Jiang’s mother, who deposited the money to her son’s personal account in the United States.
In April 2017, federal agents in Portland began investigating after the U.S. Customs and Border Protection seized a number of suspicious shipments from Hong Kong of cellphones with “Apple Inc. markings and design features that appeared to be counterfeit.” Months later, Apple reportedly sent cease-and-desist orders to an address associated with Jiang but the orders were ignored.
Later that same year, Homeland Security Investigations agent Thomas Duffy interviewed Jiang after identifying him as one of the alleged importers of fake phones. Jiang told the investigators that he often received “packages containing 20 to 30 iPhones from an associate in China.”
Jiang is currently facing charges of illegally trafficking counterfeit goods and fraud, while Zhou is accused of illegally exporting goods. Both men have denied knowing the phones were counterfeit. The duo’s plan worked for as long as it did because Apple Store employees were not able to verify the authenticity of the phones since they would not power on, according to a Homeland Security agent.
Apparently, this isn’t the first time someone has managed to make significant profits from selling knockoff Apple products. According to a report from The Verge, last year, a Chinese man living in New Jersey pled guilty to selling fake Apple products. He reportedly made over a million dollars selling fake iPhones and iPads.