Two Chinese nationals, Haotian Sun and Pengfei Xue, living in Maryland were sentenced to at least four years in prison for running an iPhone repair scheme that cost Apple $2.5 million. The duo exploited Apple’s repair process by sending over 6,000 counterfeit phones to the manufacturer, which couldn’t be fixed, leading Apple to replace them with genuine iPhones. The phones had spoofed serial and IMEI numbers to appear authentic and were shipped from Hong Kong using DHL and UPS. Apple’s Brand Integrity Investigator caught on to the scheme after realizing that the fake devices had unique numbers belonging to real customers. The fraud carried out by Sun and Xue started in 2017, when they purchased UPS mailboxes in Maryland to send and receive counterfeit phones, claiming replacements under warranty. They were arrested in December 2019 and found guilty of conspiracy and mail fraud charges in a trial.
Fraudulent returns are a widespread issue, with the National Retail Federation reporting that return fraud cost companies $101 billion in 2023. Apple has faced similar incidents in the past, including a case where two brothers trafficked illegally obtained iPhones and iPads, costing the company $6.1 million. In another case, a Connecticut man exploited Home Depot’s return system, costing the retailer nearly $300,000. These examples highlight the growing problem of fraudulent returns in the retail industry.
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