The three brothers are all naturalized USA citizens who were born in China.
A criminal syndicate run by three brothers in San Diego bilked Apple out of an estimated $6.1 million in a scheme that exchanged more than 10,000 fake iPhones and iPads from China for real ones at stores across the USA and Canada, according to a federal indictment unsealed Wednesday.
According to the indictment, all genuine Apple iPhones have an International Mobile Equipment Identity (IMEI) number, and a serial number, that are both unique numbers to each device. As part of the scheme, the counterfeit devices were equipped with IMEI and serial numbers that matched those of real devices covered by an Apple warranty in the United States or Canada, according to the release.
Apple provides a one-year warranty for new devices wherein customers can return a defective device and receive a replacement.
It is not known how the defendants were able to get their hands on authentic IMEI and serial numbers.
The crime ring began as far back as 2014, according to the indictment.
"While a significant amount of money in any circumstance, this prosecution is about more than monetary losses", U.S. Attorney Robert Brewer said in a statement. According to the indictment, 33-year-old defendant Xiaomin Zhong, a Chinese national residing in China, wired $48,148 from an account in China to Zhiwei's Bank of America account on December 18, 2014. The FBI arrested 11 people but still searching for three others.
Agents seized $250,000 in cash and about 90 iPhones in raids on Wednesday. Other suspects include other Naturalized U.S citizens from China, as well as Korea, Russia and Vietnam. Chia "Charley" Ming, is believed to be in the San Diego area, Hyo "Will" Weon Yang might be in San Francisco, and Xiaomin Zhong, the team's alleged counterfeit supplier is likely in China.
In at least some instances, the mules would make appointments at various Apple stores through fake email accounts, the indictment alleges. The real goods were then sent back to China to be sold. In 2015, Hsu allegedly sent a text message from North Carolina to Zhiwei Liao in San Diego complaining that the iPhones he'd been given to turn in "look so fake", the indictment states. It is not known the reason for the rejection.
"This significant investigation and the indictment of these 14 individuals shows the FBI's commitment to working with the United States Attorney's Office and our law enforcement partners to combat worldwide fraud schemes that affect American citizens and American businesses against counterfeit goods originating in China and those fraudsters who exploit American trademarked products for their personal financial gain".
The 14 accused face charges of fraud, conspiracy, identity theft and money laundering.