IPhone replacement scam by college students costs Apple almost $1M

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That suggests that in order for the scam to work, Jiang and Zhou had to have access to authentic iPhone serial or International Mobile Equipment Identity numbers, also called IMEI numbers, that would indicate the devices were still covered by the fix warranty. Both duped Apple of $895,800 in total as per company estimates.

Jiang would then take the fake iPhones to Apple either in-person to Apple retail stores or by means of the online fix program.

The real iPhones were then sent off to China in return for which money was paid to Jiang's mother, who lives in China.

Apple "repaired" (most likely just swapped them for refurbished ones) and returned 1,493 of the more than three thousand fake iPhones that were sent to its service before it got an alert that something was amiss on a grand scale. Once in the United States, the devices were sent to the company for repairs or replacements.

Beginning in 2017, the two men allegedly smuggled thousands of counterfeit iPhones into the U.S. from China and then sent them in for Apple to fix or replace, claiming the knockoffs wouldn't power on.

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Court documents outline a scenario in which the two men imported thousands of counterfeit iPhones from China and then filed warranty complaints with Apple, claiming the smartphones were broken and wouldn't turn on.

That sort of puts a dent in both students' defence that, allegedly, neither knew the phones in question were counterfeits. He said he used friends, relatives and name variations to receive the packages from China, as well as the replacement phones from Apple. The company realized numerous thousands of phones were counterfeit but still returned nearly 1,500 genuine replacements to the students, NBC News reports. Jiang could access the bank account from the U.S. in which his mother deposited the money received by selling the phones in China. Apple's legal counsel said the company sent two letters in 2017 to Jiang at Zhou's address, placing him "on notice that he was importing counterfeit Apple products".

While Zhou is being accused of illegally exporting goods, Jiang is facing charges on illegally trafficking in copied goods and committing wire fraud, the report noted. Eventually Apple realized and sent a cease and desist order to the address where Zhou and Jiang lived, but it was ignored. Zhou is being charged with "submitting false or misleading information on export declaration". Each unit costs about $30, which means that the duo profited nearly $600 for every successful return.

They shipped back the original phones overseas and made profits from the sales, according to federal prosecutors.

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