Two individuals have been sentenced to prison for orchestrating a scheme that reportedly cost Apple around $2.5 million. Haotian Sun and Pengfei Xue ran a fraudulent operation where they posed as a repair service, sending counterfeit phones to Apple and falsely claiming the devices couldn’t be fixed in hopes of receiving genuine replacements.
Based in Maryland, USA, Sun and Xue carried out the scam over several years, sending thousands of fake phones to Apple. The counterfeit phones, sourced from Hong Kong, were equipped with spoofed serial numbers and International Mobile Equipment Identity (IMEI) numbers, making them appear authentic even to Apple employees. By exploiting defects in the counterfeit phones, they were able to qualify for replacements under Apple’s return policy.
The scam cost Apple an estimated $2.5 million. Court records reveal that the fake phones were shipped via UPS and DHL from Hong Kong, according to Postal Inspector Stephen Cohen. An Apple Brand Integrity Investigator discovered the scheme when the serial numbers of the counterfeit devices were found to match those of legitimate customer phones.
Cohen explained, “Apple confirmed that some intercepted phones had spoofed IMEI and serial numbers corresponding to actual iPhones still under warranty.” Upon inspecting a sample of recovered phones, Apple determined they contained counterfeit components. Email addresses tied to the return of the devices were also linked to Sun.
This type of scheme, known as ‘return fraud,’ isn’t exclusive to Apple. According to the National Retail Federation, return fraud cost U.S. companies $101 billion in 2023, amounting to a loss of $13.70 for every $100 in returned merchandise.
Sun and Xue were arrested in December 2019 and convicted of conspiracy and mail fraud. Sun received a 4.5-year prison sentence and was ordered to pay $1,072,200 in restitution to Apple. Xue was sentenced to four years in prison and ordered to pay $397,800.