Two Oregon college students have been accused of tricking Apple into giving them nearly $900,000 worth of iPhones, which they then allegedly sent back to China to be sold for profit.
Yangyang Zhou and Quan Jiang were both in the United States legally in 2017, while studying engineering at Oregon State University and Linn Benton Community College, when the scam allegedly began. According to documents, the men recieved shipments of counterfeit iPhones from "an associate" in China, which they would then submit to Apple for a warranty replacement by claiming that the phones wouldn't turn on.
Apple replaced about half of the phones Jiang submitted claims on, returning 1,493 phones in 2017 and 2018, Oregon Live reports. Jiang then allegedly sent them back to his "associate" to be sold at their real value in China. Money profiting from the scheme was then filtered to Jiang's mother, who put the funds into a bank account he could access from the United States.
At about $600 per phone, Apple estimates that the international scheme cost the company $895,800.
The warranty replacement process includes an analysis by an Apple technician to ensure that the phone isn't counterfeit, which they were able to determine in a number of Jiang's phones. However, Apple said that in Jiang's case, many of the phones were replaced because it's not always possible to analyze a phone that won't turn on.
Authorities first became suspicious in April 2017, when Customs and Border Protection confiscated five cellphone shipments from Hong Kong which appeared to be counterfeit. In December of that year, Jiang was being questioned by Homeland Security Investigations agent Thomas Duffy.
In an affidavit, Duffy wrote that Jiang told him he had submitted about 2,000 claims for phone replacements in 2017 alone. However, Jiang maintained that he did not know that the phones he was receiving from China were counterfeit. Zhou is accused of making more than 200 warranty claims to Apple, and discovered three shipments with 95 counterfeit iPhones in his home.
Jiang, who lives in Corvallis, allegedly paid friends and relatives to use their addresses in the surrounding area to receive the shipments from China, in an apparent attempt not to draw attention to his own address.
Jiang is facing federal charges for wire fraud and trafficking of counterfeit goods. The wire fraud charge carries the possibility of 20 years in prison, while the trafficking charge could be penalized with up to $2 million and 10 years in prison. He's currently not being held in custody but is being monitored by a GPS.
Zhou stands accused of submitting false information on an export declaration, and is facing up to $10,000 in fines and five years in prison. He also remains out of custody.
Jamie Kilberg, an attorney for Zhou, told CNBC Make It that he's confident his client with be exonerated.
"With respect to Mr. Zhou, the government has the case completely wrong," Kilberg said. "Mr. Zhou had no knowledge of any alleged counterfeiting scheme, and when the actual facts come out, we are confident he will be vindicated."