Two Chinese nationals living in Maryland have been sentenced for defrauding Apple out of millions of dollars worth of iPhones, the U.S. Department of Justice (DOJ) announced on Thursday.
Sun Haotian, 34, of Baltimore, was sentenced to 57 months in prison and three years of supervised release. He was ordered to pay Apple over $1.07 million in restitution and a forfeiture money judgment of $53,610.
Xue Pengfei, 34, of Germantown, was sentenced to 54 months in prison and three years of supervised release. He was ordered to pay $397,800 in restitution to Apple and a forfeiture money judgment of $19,890.
According to court documents, the men and their co-conspirators devised a scheme to exploit Apple’s one-year warranty policy for new phones.
They obtained fake or refurbished iPhones with spoofed serial numbers or IMEI numbers from Hong Kong and submitted them to Apple stores or Apple-authorized repair centers so Apple could replace them with new iPhones.
Between May 2017 and September 2019, the group submitted over 6,000 inauthentic phones to Apple, causing an intended loss of approximately $3.8 million and an actual loss of more than $2.5 million, the DOJ said in a press release on Wednesday, the same day that both men received their sentencing.
On Feb. 20, following a three-and-a-half day trial, Sun and Xue were convicted by a federal jury in the U.S. District Court in the District of Columbia of one count and six counts of mail fraud, respectively, and the men were each convicted of one count of conspiracy to commit mail fraud.
According to court documents, Xue is a lawful permanent resident who moved to the United States when he was 21 and had “a history of legal and productive employment” before being recruited by a co-worker to join the scheme to defraud Apple.
Sun moved to the United States in 2007 with his mother when he was 17. Sun’s mother later married Sun’s stepdad, who works at the Pentagon. Sun, a non-U.S. citizen, is “currently out of status,” according to court documents.
Sun submitted at least 3,245 phones for repairs, and Apple issued replacement phones for 2,103 of them, worth $1.26 million, while Xue submitted 1,017 and got 705 replacement phones, worth $423,000.
Another alleged conspirator was accused of submitting 1,930 phones (1,445 replaced), and their alleged handler submitted 157 phones (107 replaced), the documents show.
In addition to going to Apple stores and repair centers, the defendants registered repairs online and dropped off phones via multiple UPS mailboxes.
Court documents show Xue rented at least two UPS Store mailboxes, created at least three email accounts for the scheme, and recruited and supervised other participants.
Sun opened at least eight UPS mailboxes, created multiple email addresses, used more than a dozen names, and supervised at least one other person.
The court heard on Jan. 31, 2018, that a postal inspector and another government agent spoke to Sun after three packages of phones, including counterfeit phones, from Hong Kong were intercepted. Still, Sun continued with the scheme until his arrest in December 2019.
In April, Sun’s lawyer, Stephen Brennwald, filed a motion for a new trial or judgment of acquittal, citing insufficient evidence.
According to Brennwald, Sun’s conviction hinged on two phones he had mailed from a Washington location on Oct. 3, 2018, and government witnesses failed to prove that the two phones were counterfeit.
