Apple warranty fraud is a great way to make money. I know of a guy who between 2008 and 2010 would purchase used iPod lots from Costco Electronic Hardware Services, refurbish the water damage indicator in the headphone jack and dock, and then try to return the iPod to one of the few Apple stores in the Seattle area. The refurbishing method would consist of cutting tiny strips of white wax paper, applying a little adhesive, and then sliding the paper flush down the hole. When Apple caught onto this guys method, he would later take the whole headphone assembly apart by using a pen knife to lift the plastic around the headphones, pulling the jack out, and using whiteout to cover the other end.
I went to the Apple store with this guy and felt ashamed just being around him as he dropped off a dozen water damaged iPod Nanos, each with an appointment, telling the guy that they were from guys in Iraq, as if that were to add some emotional weight to getting new ones.
Nearly a decade later I found out the guy was running the same scam with the iPhone SE by using reassembled water damaged phones or dummy phones from China. I am guessing he didn't get caught because the scale of his operation were a few at a time, maybe a couple hundred in a year, but not thousands over a year.
Now that I think about it, I had let him use my Apple account for appointments and claims, and ever since then, I have always had a bad time working with the genius bar over things that I bring in.
There is probably a long tail of bad outcomes that could arise from admitting illegal activity on the web. But I don't think it stands up to the kind of cause-and-effect that'd be like:
IF you say on a forum, "I broke this law," THEN you get an email from hello@police.com saying, "You spoke and we listened!"
I had an email about an iPod Nano. More than happy to talk to Apple about it, but when I emailed them in 2010 about the scheme my friend was running, I never heard anything back.
I don't think simply being in the room with someone committing a crime, even knowing that's what they're doing, doesn't give you accomplice liability. I think you have to assist or encourage. You do not generally have an affirmative responsibility to prevent people from committing crimes.
As always with the internet, “the stories and information posted here are artistic works of fiction and falsehood. Only a fool would take anything posted here as fact.”
I know what you mean, but I don't think I'd call any method of fraud a "great" way to make money. Even as small as he is, that's still taking him to jail when he gets caught. Eventually he'll get high enough on their list that he'll be worth stopping.
My understanding is that it is known that the Apple water damage indicator triggers even if you have it in a high humidity environment like the south during the summer. Or on the counter in the bathroom while taking a shower. Or wiping the case with a slightly dampened cloth to remove dust and fingerprints, as is recommended. It's been intentionally designed this way, with an incorrect triggering level, in order to be able to fraudulently deny warranty claims and save money. Lots of accounts of people who absolutely never dropped it in water have had legit warranty claims denied. In my opinion, the scam here is being perpetrated by Apple, and has been ongoing a long time.
Apple is literally famous for doing free warranty replacements for people who don't actually qualify. There's thousands and thousands of stories of this sort of thing over many years. Forgive me for not believing you when you say Apple is conspiring to defraud customers out of warranty replacements.
I guess it depends on how much a stickler for rules the particular tech is? I had a laptop replaced which did not have waterdamage but did have the indicators activated; the guy asked me; ‘did any fluids spill over this?’ I said no and he gave me a new laptop. I had an iPad which definitely had no water damage either (I was the only user) but that one was refused because the indicators were triggered. Those things are flawed and this process is/was flawed, so now I simply have insurance that covers whatever: saves thinking about it.
Water damage indicators are known to not be perfect. That's unfortunate but true. It doesn't mean Apple is deliberately making them be bad in order to avoid warranty replacements though.
No, agreed. So in really humid weather, say, HK in the summer, the keyboard of the Pro breaks randomly if you do not care it in a watertight pouch and the indicators trigger. Not waterdamage as Apple means it to be and I have not had issues with replacements there but you wonder what the purpose of the indicators is then.
A 'lot' is a unit of issue in this case as a supply/logistics term. It means buying a grouping of damaged iPods (say the lot was 25 or 50 individual iPods).
Costco would sell a couple dozen to several hundred iPod Classics, Nanos, and Touches, all in varied condition, as a "lot". At best you could buy these based off of a grade, which just judged their physical condition, but most of the time you were always buying these a couple dozen at a time, sight unseen.
You have to be a business in the state of Washington and sign an agreement with Costco. It isn't a thing they open with anyone and when I inquired about doing this on my own, even with a license, I was turned away at the door by security.
good for him for finding a market inefficiency and exploiting it. I dont know why people's moral compunction kicks in for profiting off a trillion dollar company. He used their system for his advantage, just like apple uses the UK's "double irish" system to their advantage. It's just business. You're not depriving anyone of property.
It's not "exploiting a market inefficiency" anymore than someone breaking into your house is just exploiting a lock inefficiency. It's plain old fraud.
it's ok to steal from them after they've stolen X billion from USGOV and consumers. Absolutley. and AAPL essentially writes its own laws. Let consumers draft legislation with the same access and bribes/lobbying as AAPL and see how long this stays illegal.
They didn’t steal anything. Sorry our tax laws are shit and they used them to their benefit. Do you personally pay more taxes than you should? I doubt it.
For clarification I don’t like the practice of off shoring your money. Apple isn’t the only corporation that does this though. You’re misplacing your blame when it really should be at the US government. We can work to get rid of money in politics but for now that is unfortunately where our country is headed. For the corporations.
Corporations don't have pockets, and burglary is theft. If AAPL had a policy that allowed you in their premises and legally allowed you to remove items, then that's a market inefficiency.
Many moons ago I worked at an apple store genius bar, and this was constant. There wasn't a whole lot we could do about it unless the phones were obvious fakes. Those we would reject, as well as ones where the serial number came up as having been replaced a number of times.
Guys would bring in a bunch of phones at a time. They knew the apple store drill and would make a separate appointment for each phone. It sucked, and took time and resources away from real customers. But we couldn't broom them without a concrete reason so they usually got at least a couple phones replaced.
We mostly assumed the phones were stolen and were being washed for new serial numbers, but it makes perfect sense that there are big counterfeiting operations behind this.
I think I just realized what kind of people I sold my authentic MacBook Air case bottoms to. And case from a broken iPhone.
Edit: side note: it took a while to sell for not a lot of money. But other than someone needing to drill out a screw and caring about how it looked afterwards, i couldnt figure out why anyone would buy.
Its battery died. With a student discount and the cost of a new battery, I could (and did) upgrade to a new model by selling all the parts. Even the screws.
Some say the MacBook Air is highly integrated and unrepairable. They are wrong.
Because it has value? If you have something that you don't want and someone else wants to buy it (and there's no obvious fraud involved), it's a trivial decision.
The point was, how do you know it has value if you can't figure out why anyone would buy it?
I was genuinely curious. A perfectly fine answer would have been "I try and sell everything, because I don't know if it has value to someone". But failing that, you had to have decided to try it for some reason....
Curious, in what region was your prior experience with this scam?
Because I'd heard this was rampant and sophisticated in China – with fraudsters being very advanced in their ability to make "junk inside" devices indistinguishable from authentic broken devices, via any cursory/external analysis. But, until this story, I hadn't heard of it at scale in the US. (And here, as well, it seems the high-quality fakes are coming from China.)
At least it was the consumer ripping off the corporation for once. Think of the chicklet keyboards, or the proprietary, consumer-hostile tactics that stole millions from consumers (or the billions in taxes that apple refuses to pay). It's nice to see the tide turn occasionally.
I'd like to pedantically point out that this source is the only one who followed literary convention and wrote out the word "two," which you're supposed to do for any number under 10.
This is one of those things were you'd think they'd automatically flag warranty claims for manual review after... what a few? I mean how many individuals (non-business) ever make more then say 5 warranty claims in their lifetime (with one company)?
In the last 10 years I've had at least a dozen warranty claims with Apple, maybe more. Usually just one claim per machine, sometimes two. And iPhones… I can't even keep track of that. You get two replacements with AppleCare+ and I almost always use them both. I've probably gotten a dozen replacements on broken iPhones alone. Not exactly 3,000+, but way more than 5. That's also not exactly abnormal. When you see people with cracked screens and ask them why they don't get them fixed the answer is usually, "I already used my replacements."
I would think that, among lifetime Apple customers who purchase AppleCare the average is actually above 5.
I work in phone repair so I know how the cracked screens go haha.
Either way, it seems like if somebody has 5+ warranty claims in 1 year it'd at least be worth having somebody look into it? Not saying they deny it, just that it may be suspicious.
Just a anecdote of my own, I've had my iPhone 7+ for 2 years and my mom's had an iPhone 5S for 4 or 5 years, and we've never broken our screens, nore do we have huge bulky cases, just slim rubbery ones with glass screen protectors. We've both dropped them tons, just depends on luck I guess.
Same. In fact, I've had every iPhone and never even used a case until they started with the camera bump. I dropped them all the time and only broke my first screen a couple weeks ago. Thankfully Wells Fargo credit card covers the $280 apple repair for $25.
Bingo. Apparently there is another CC that also has this benefit (according to a CC article I read once) but I was never able to track it down. Anyone know?
There is a pretty big difference between 1-2 a year and thousands. Seems like it would be trivial to use an algorithm to flag the users that are, say, two or more standard deviations from normal, and pay a little more attention to their circumstances.
You don't even need fancy algorithms. Seems like they they could just look at the current average number of claims per customer per year, there's no way it's higher then say 5. And then just flag everything after that.
Not saying they deny the claims after that, just flag them to be looked into.
Not exactly meaningfully harder for a computer to do one than the other.
Probably the thing to do is work backwards from the resources that are available to investigate them. Then just skim off that many outliers. Do it until it's not saving the company more money than it takes to pay those people.
Of course, that implies that Apple has anyone to look at them, which it may not, and is probably the first problem...
Heh, looking at something a couple std devs from the mean isn't fancy; it's a pretty standard way of looking for outliers in any process. Besides, flagging everyone over the average would mean flagging roughly half of all return claims. That would require legions of people to look at, and would provide a really bad customer experience.
Those are replacement rates I haven't seen since I worked for a beer & wine distributor. The sales guys would have issues all the time, usually after the weekend. What kind of activities do you do that require such frequent replacements? Or is it just faulty hardware? I suppose once a year isn't super frequent, but still more frequent than I like from expensive equipment.
I do, however, see tons of folks with cracked iPhone screens. Makes me chuckle; as an Android user, and one who doesn't need the latest and greatest, my phones are nearly disposable. Crack the screen? Spend $129 on another.
If you're happy with your $129 phone then perfect! I'm not criticizing that at all, and many people would also be happy with it.
I will say however that many people will be looking into higher end android devices though, and for the Samsung series they're often over 200$ [0], while iPhone screens are mostly under 30$ [1]. That's for our store to buy the part, before charging for labor+fees, etc. After fees you'd be looking at ~300/350 for an S8 and ~85$ for an iPhone 7/8. Not sure what it's like with the newest iPhones, those don't really come in often for repairs (yet).
Just pointing out that android phones are usually more expensive then iPhones to repair. I've personally used cheaper devices and they were just too slow for me, but it's all personal preference.
Until recently, it was exceedingly difficult for many classes of business to get a "Business" account with Apple service. I've done something like 25 Apple warranty repairs in the past 12 months under a "personal" account. But yeah... triple digits should at least trigger some flags.
Back in the early oughts', I believe the chap that ran... A prominent Mac/Apple review site got to experience what Apple's customer support looked like for someone making too many warranty claims.
I think his Mac had an issue with his screen + latch. He sent it in, and made the grave mistake of having sent too many items for repairs. (He was spending tens of thousands of dollars a year on various pieces of hardware, that he reviewed for his site. And, naturally, he had a few returns/repairs, among the many, many items he ordered.)
The tl;dr of his story was that he had to mail it in three times, Apple didn't fix any of the under-warranty problems, and, as a final cherry-on-top, completely broke his laptop's latch.
He, of course, documented this entire adventure, along with a video where he keeps trying to close his laptop, while parroting Apple's response of 'nothing wrong with the latch'.
Sadly, the internet being what it is, this has all link-rotted away.
Appears maybe the article typoed as they reference one going to Oregon Sciences University. I don't see anything named that when searching: there's OHSU, but it appears to be based out of Portland with a partnership with OSU for the Pharmacy program.
Were all/any of the phones Jiang returned actually counterfeit?
Nothing in the article seems to definitively identify them as counterfeit. If their determination is truly based on:
> "but which appeared to be counterfeit based on shipping methods and packaging"
Seems like Jiang has a pretty solid defense. Maybe all the phones were real iPhones, but were owned by people who can't/won't do a return through apple themselves.
From the second part of your question, it sounds like you're focusing on the "wire," when your answer lies in focusing on the "fraud."
It can't be applied to "any activity done with electronic device[s]," unless that activity is to trick people into giving you money in exchange for a bogus or nonexistent product or service.
As in the text of the law in a sibling comment, the rules parallel "mail fraud," which is the same: if you send a magazine offering to sell someone a fancy tool kit for $200, and they send a check and you send a box of dirt, you've committed mail fraud.
If you do the same thing over the phone or internet, it's wire fraud.
In this case, the fraud went the other way: Apple says "if you bought a thing from us, you can return it," students say, "we bought this thing, please give me money back," but really, they didn't buy it, because this thing was a fake.
I'm not a lawyer, but I think it's the lying about the counterfeit nature of the item returned is what makes it a crime. Focusing on whether it's wire or mail or some other kind of fraud, or what other kind of device activity is covered under the statute, is not as relevant as the lying part.
The elements of wire fraud, per the DOJ criminal resource manual:
> The elements of wire fraud under Section 1343 directly parallel those of the mail fraud statute, but require the use of an interstate telephone call or electronic communication made in furtherance of the scheme. United States v. Briscoe, 65 F.3d 576, 583 (7th Cir. 1995) (citing United States v. Ames Sintering Co., 927 F.2d 232, 234 (6th Cir. 1990) (per curiam)); United States v. Frey, 42 F.3d 795, 797 (3d Cir. 1994) (wire fraud is identical to mail fraud statute except that it speaks of communications transmitted by wire); see also, e.g., United States v. Profit, 49 F.3d 404, 406 n. 1 (8th Cir.) (the four essential elements of the crime of wire fraud are: (1) that the defendant voluntarily and intentionally devised or participated in a scheme to defraud another out of money; (2) that the defendant did so with the intent to defraud; (3) that it was reasonably foreseeable that interstate wire communications would be used; and (4) that interstate wire communications were in fact used) (citing Manual of Model Criminal Jury Instructions for the District Courts of the Eighth Circuit 6.18.1341 (West 1994)), cert. denied, 115 S.Ct. 2289 (1995); United States v. Hanson, 41 F.3d 580, 583 (10th Cir. 1994) (two elements comprise the crime of wire fraud: (1) a scheme or artifice to defraud; and (2) use of interstate wire communication to facilitate that scheme); United States v. Faulkner, 17 F.3d 745, 771 (5th Cir. 1994) (essential elements of wire fraud are: (1) a scheme to defraud and (2) the use of, or causing the use of, interstate wire communications to execute the scheme), cert. denied, 115 S.Ct. 193 (1995); United States v. Cassiere, 4 F.3d 1006 (1st Cir. 1993) (to prove wire fraud government must show (1) scheme to defraud by means of false pretenses, (2) defendant's knowing and willful participation in scheme with intent to defraud, and (3) use of interstate wire communications in furtherance of scheme); United States v. Maxwell, 920 F.2d 1028, 1035 (D.C. Cir. 1990) ("Wire fraud requires proof of (1) a scheme to defraud; and (2) the use of an interstate wire communication to further the scheme.").
It's a fairly broad statute, but to answer your question, it depends on whether the "activity" in question meets all of the elements of wire fraud.
Laws like this drive me nuts. Why isn't it simply fraud, full stop? Degrees of fraud are fine, depending on the egregiousness of the fraud. Special cases for the type of harm are fine (fraudulent phone vs fraudulent life-saving medication). Why the hell do we need "mail fraud" and "wire fraud"? It's just noise.
> Why the hell do we need "mail fraud" and "wire fraud"?
Mail fraud and wire fraud are federal crimes where the federal Constitutional power justifying federal law is the postal authority and the interstate commerce clause via the national character of the covered telecommunication networks, respectively.
The US federal government has no Constitutional authority for a general fraud law.
That aside, there are various ways specialized domains create risks of particular conduct that might carry the same general problem as fraud in general, but where the context makes it important to define the prohibited conduct differently than is appropriate for general fraud laws.
Dont phones have serial numbers which are attached to apple ids? Why could apple not implement some reporting based on device serial number or apple id?
It's probably a public perception thing: from my experience and a lot of other anecdotes, they're incredibly accommodating with the service and replacement programs. The Verge or Engadget would have a near annual article about "iPhone [2-3 generations ago] still under AppleCare being replaced with iPhone [more recent generation]."
Yeah, losing out to counterfeiting stinks, but I think they prefer the perception of being customer service centered. Probably worth more to them than the losses it generates.
> Zhou and Jiang were living in Corvallis, Oregon, on student visas to study engineering — Zhou at Oregon Sciences University, Jiang at Linn Benton Community College, court documents said.
Not sure if it's been posted yet, but I'm 99% sure this is a typo. Oregon State University is what they meant.
Reminds me of a scammer at work in the 90s (attws). She was ordering base stations 2 at a time, deploy 1, sell one. She made a couple million but kept going until someone noticed she should have a stock of base stations.
wow thousands- if he was just to do like 12 a year he would have stayed under and have some income.. i guess even if he gets half.. its a few thousand a year
Apple was losing billions in China. While this is just some of the phones trickling into other markets for replacement, it's still fraud and hurting Apple. This is why recently they've started to say iPhone exchanges had to be sent to depot rather than just replaced on the spot.
Isn't it possible they didn't know the phones were fake? If the fakes are so good that even Apple can't tell, then it's possible they thought they were real. Maybe they thought they were buying genuine iPhones for cheap since they were broke and having Apple send replacements to make a profit? Or am I missing something?
They werent fake, they were "unauthorized", as fake as _original_ Apple batteries and screens being seized by customs because they bear Apple logo.
How the scam works - Apple sends their junk to China to remanufacture/recycle. There instead of being ground into a fine dust some end up in chinese panties to be smuggled out of the facility. Next someone pulls out most profitable still working parts, puts the phone back together and tries to pass it thru warranty process again: https://appleinsider.com/articles/18/10/09/rampant-chinese-i... Apparently they managed to get a grip on Chinese fraud, so scammers moved operation into US.
There is no such thing as Genius at the "genius" bar, they arent allowed to repair anything (can only sent it up the chain to Texas afair) and often dont even know how to open products, not to mention being able to tell what should be inside.
I think Apple just shreds. No harvesting and re-marketing of spare parts, unless its for their own internal repairs.
It's why I have been able to harvest my old units for parts and cover a substantial cost of each upgrade. I even sold a completely broken iphone 7 mainboard for $40, without fingerprint reader. I literally found the phone smashed to pieces on the ground (with SIM removed).
Replacement phones are refurbs - previously returned broken phones with trivial defects, fixed in US using parts re manufactured(motherboards) in China.
Your line of thinking is perfectly valid and that seems to be the defense argument, but overall the article seems to suggest that it was well organized. Someone in China was sending constant shipments of phones to them at various locations, and they would send back the real replacement phones and then get paid via one of the guys's mom. As you say, it's still possible that they legitimately believed the phones were just broken and they were helping facilitate repairs but to me it's a little hard to believe given how organized it was.
If someone is having you do something they could do themselves, and they want you to do it more than once.. it's probably illegal.. 1000 times.. definitely illegal; and you can't really play the ignorance card at that point.
Yeah, but the frequency is the thing. They returned several thousand, which - if legit - means these two were the point of contact for an entire village back in China.
I can buy that the guy sending them back may not have known, though again the quantity he was sending should have raised a red flag. But the guy who was receiving the broken counterfeits and returning them to Apple? No way he didn't know he was doing something shady.
> The fact that we choose to blame broke students instead of the multinational corporation that uses child labor for almost everything is kinda telling
Broke students, who, seemingly managed to buy 3000+ Apple phones and return them? That's some terrible luck they had :-)
It's amazing we do any business with China (or any country not a strong proponent of western values) and in this case it's Foxconn. The makers of: BlackBerry, iPad, iPhone, iPod, Kindle, Nintendo 3DS, Nokia devices, Xiaomi devices, PlayStation 3, PlayStation 4, Wii U, Xbox 360, Xbox One, and the TR4 CPU socket on some motherboards. Just curious if you actively shun anyone who uses these products?
There are correct ways to deal with multinational corporations and any abuses you believe they are committing - in this case Apple was (probably, the article is terrible) the victim and should have recompense... separately they should be paying back taxes on all that revenue they sheltered by putting stickers on computers in bermuda. And before the what-about-ists get in, so should every other company as well.
I went to the Apple store with this guy and felt ashamed just being around him as he dropped off a dozen water damaged iPod Nanos, each with an appointment, telling the guy that they were from guys in Iraq, as if that were to add some emotional weight to getting new ones.
Nearly a decade later I found out the guy was running the same scam with the iPhone SE by using reassembled water damaged phones or dummy phones from China. I am guessing he didn't get caught because the scale of his operation were a few at a time, maybe a couple hundred in a year, but not thousands over a year.
Now that I think about it, I had let him use my Apple account for appointments and claims, and ever since then, I have always had a bad time working with the genius bar over things that I bring in.