Two Chinese nationals have been sentenced to prison in the U.S. for their involvement in a large-scale scheme that defrauded Apple of over $2.5 million by swapping counterfeit iPhones for authentic ones.
The fraud, which ran between 2017 and 2019, involved Haotian Sun, Pengfei Xue, and their accomplices submitting thousands of fake, non-working iPhones to Apple under its warranty and replacement programs.
The fake devices were shipped from Hong Kong to various locations in the U.S., where Sun, Xue, and their co-conspirators used legitimate identification, including university IDs and driver's licenses, to rent mailboxes at UPS stores. Once the counterfeit phones arrived, they were handed over to Apple retail locations and authorized service centers as part of fraudulent warranty claims. The counterfeit devices were equipped with false IMEI numbers and serial codes, making them appear legitimate in Apple’s system.
Apple, unaware of the fraud, replaced the fake devices with genuine iPhones, which were then sent back to the conspirators via mail services such as FedEx and UPS. The newly obtained authentic devices were shipped back to Hong Kong, where they were sold for profit, and the earnings were divided among the group.
The U.S. Department of Justice revealed that the scheme resulted in more than 6,000 counterfeit iPhones being exchanged for real ones, leading to significant financial losses for Apple. The scam was uncovered by U.S. postal inspectors, leading to the arrests of Sun and Xue in December 2019.
In court, both Sun and Xue were convicted of mail fraud and conspiracy. Sun received a 57-month prison sentence, while Xue was sentenced to 54 months. Both were ordered to pay restitution to Apple, totaling over $1.4 million combined, and will serve three years of supervised release after their prison terms. This case highlights the risks companies face in handling large-scale warranty replacements and the lengths to which fraudsters can go to exploit these systems.
