College students allegedly scammed Apple out of nearly $1M in iPhone replacements
Two Chinese engineering students in Oregon allegedly scammed Apple out of hundreds of thousands of dollars in iPhone replacements and are now facing criminal charges in federal court, as first reported by The Oregonian. Authorities allege the students pulled off a convoluted scheme in order to wring Apple of the cash by using counterfeit devices and exploiting Apple’s return policy.
Beginning in 2017, the two men allegedly smuggled thousands of counterfeit iPhones into the US from China and then sent them in for Apple to repair or replace, claiming the knockoffs wouldn’t power on. In many cases, Apple did replace the counterfeit goods with real iPhones, which cost the company an estimated $895,800.
According to federal complaints, both Jiang and Zhou claim they didn’t know the original phones were counterfeits. Both remain out of custody, but Jiang, who was accused back in 2018, is being monitored by GPS. Zhou is being accused of illegally exporting goods, while Jiang is accused of illegally trafficking in counterfeit goods and committing wire fraud.
A Homeland Security agent explained in the complaints that the scheme worked primarily because Apple Store employees couldn’t verify the authenticity of the devices since they would not power on. But the Apple phone replacement process was triggered in the meantime, as the men claimed they were covered under product warranty. Apparently, Apple didn’t require proof of purchase to replace the phones.
Jiang allegedly submitted 3,069 warranty claims and Apple granted 1,493 replacement iPhones as a result. At the estimated value of $600 per phone, Apple lost nearly $900,000 from this scheme. In June and July of 2017, Apple sent Jiang cease-and-desist orders to Zhou’s listed address, notifying Jiang that Apple knew he was importing fake iPhones. Jiang did not respond to the notices.