Chinese nationals arrested for alleged device fraud worth $12.3 million

Five Chinese nationals are scheduled to be arraigned Friday in downtown Los Angeles on federal charges related to allegations they ran an Apple Inc. counterfeit device scheme that involved fraudulent returns of thousands of fake iPhones, iPads and other products at stores across the South. California.

Prosecutors said the scheme cost Apple at least $12.3 million in losses.

According to the indictment, from approximately December 2015 through March 2023, alleged ringleader Yang Song, 40, of Corona, and Junwei Jiang, 37, of East Los Angeles, worked with associates in China to ship counterfeit iPhones ‘s, iPads and other Apple devices to them and other US co-conspirators.

According to the indictment, the counterfeit Apple devices were made to look like genuine products and their identification numbers matched those of real products that were sold in North America and were still under warranty.

The defendants allegedly returned the counterfeit devices while pretending to be the rightful owners of the actual items.

The products were returned to Apple stores throughout Southern California, including Beverly Hills, Sherman Oaks, Pasadena, Irvine, Northridge, Manhattan Beach, Brea, Rancho Cucamonga, Cerritos, and malls such as The Grove in Los Angeles, South Coast Plaza in Costa Mesa, Fashion Island in Newport Beach and The Americana at Brand in Glendale, prosecutors say.

In multiple cases, Song, Jiang, Zhengxuan Hu, 26, of Alhambra, and Yushan Lin, 30, and Shuyi Xing, 34, of Corona, visited as many as 10 different Apple stores in a single day to return counterfeit devices, court documents allege .

According to the U.S. Attorney’s Office, the defendants allegedly claimed the devices were original but broken and covered by the company’s warranty programs.

Then, during the same visit, Apple employees replaced or repaired the counterfeit Apple device with a genuine Apple device or, on other occasions, took the defendants’ counterfeit devices and sent them to a repair center, which ultimately resulted in the shipment of the genuine products.

After obtaining the original products, the defendants allegedly shipped them to associates in the United States and abroad, primarily in China, where they were sold for a significant profit, the indictment states.

In total, the defendants fraudulently returned or attempted to return more than 16,000 counterfeit Apple devices, resulting in losses to Apple of at least $12.3 million, prosecutors allege.

“The defendants are accused of exploiting Apple’s customer service policies to steal more than $12 million in merchandise,” U.S. Attorney Martin Estrada said in a statement. “Companies should not be harassed or defrauded for being responsive to customer needs, and these federal charges send a signal that our office will take decisive action to detect and prosecute those who commit fraud.”

All defendants were charged with one count each of conspiracy to commit wire and mail fraud, one count each of aggravated identity theft, seven counts of wire fraud, 12 counts of mail fraud and one count of conspiracy to traffic in counterfeit goods.

If convicted, they each face up to 20 years in prison for each of conspiracy to commit mail and wire fraud, wire fraud and mail fraud; a mandatory minimum sentence of two years in prison for an aggravated identity theft charge; and, according to the United States Attorney’s Office, a maximum sentence of 10 years in prison for conspiracy to traffic in counterfeit goods.

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