How Two College Students Allegedly Scammed Apple out of Thousands of iPhones

The Apple logo on an Apple Store.
Apple says the scheme cost it nearly $900,000. Nicolas Asfouri/AFP/Getty Images

Two college students in Oregon are accused of scamming their way into thousands of free iPhones, according to court documents reported by the Oregonian.

Yangyang Zhou and Quan Jiang, Chinese engineering students in the U.S. on student visas, are accused of operating a scheme that cost Apple hundreds of thousands of dollars.

Here, according to federal prosecutors, is how they did it:

An associate in China shipped packages of 20 to 30 counterfeit iPhones to the men or to Jiang’s friends and relatives, whom he paid to be able to use their addresses around Oregon. None of the phones could power on. Jiang and Zhou, his alleged accomplice, would collect the phones and either take the phones in person to Apple for repair or replacement or submit warranty claims using Apple’s online service support and ship the phones to Apple.

Apple technicians inspect phones when they are sent to them for repair to determine if the phones are real Apple products, according to the Oregonian. But because the phones Jiang sent to Apple would not turn on, Apple could often not examine them. They would go ahead and send a replacement phone.

Jiang would then allegedly ship the real iPhones back to China, where his associates would sell them for a few hundred dollars apiece. They would wire Jiang’s portion of the profits to his mother, who could then transfer the money to a bank account Jiang could access in the U.S.

According to the court documents, Apple connected Jiang to 3,069 claims related to phones that would not turn on. It replaced 1,493 of those phones. (Zhou is accused of making more than 200 false warranty claims.) The company estimated that it lost nearly $900,000 from the scheme.

Federal agents began investigating the case in April 2017 after U.S. Customs and Border Protection seized several shipments of apparently counterfeit iPhones. Apple says it sent Jiang cease-and-desist orders in June and July of 2017. Lawyers for Jiang and Zhou have argued that the two did not know they were participating in an illegal scheme and thought the phones shipped to them were genuine iPhones.

Jiang, who was studying engineering at Linn Benton Community College, is accused of trafficking in counterfeit goods and wire fraud. Zhou, who recently completed his degree at Oregon State University, is accused of submitting false or misleading information on an export declaration.