Three brothers based in San Diego in the US defrauded Apple Inc. of nearly $6 million by exchanging fake iPhones and iPads from China with real ones at stores across the US and Canada, according to a federal indictment unsealed Wednesday.
They would ship the real Apple products back to China to sell them at a premium, says the indictment.
Defendants intentionally damaged the counterfeit iPhones and iPads and fraudulently represented the counterfeit devices to be genuine Apple devices that were covered by an Apple warranty knowing that Apple would exchange damaged devices under warranty for new genuine Apple devices.
The indictment charged 14 people with various crimes.
The Liao brothers – alleged ringleaders Zhiwei, Zhimin and Zhiting – were arrested by FBI agents along with their wives. The brothers are naturalised U.S. citizens born in China. Other defendants include mostly US citizens, mostly naturalised, from China, Vietnam and Russia.
All genuine Apple iPhones have an International Mobile Equipment Identity (IMEI) number, and a serial number, that are both unique numbers to each device. The counterfeit iPhones had IMEI and serial numbers that matched IMEI and serial numbers for genuine iPhones and iPads that were purchased and used by other persons and covered by an Apple warranty in the United States or Canada.
Apple conservatively estimates that the loss associated with the counterfeit items that were fraudulently exchanged at Apple Stores for genuine Apple productss exceeds $6.1 million.
“While a significant amount of money in any circumstance, this prosecution is about more than monetary losses,” said U.S. Attorney Robert Brewer. “The manufacture of counterfeit goods – and their use to defraud U.S. companies – seeks to fundamentally undermine the marketplace and harms innocent people whose identities were stolen in furtherance of these activities. The United States Attorney’s Office is fully committed to bringing to justice those who seek to damage American markets and consumers through the peddling of bogus products.”