April 15, 2013, 8:09 AM — A group of Chinese iPhone distributors have been arrested for duping Apple with fake components in order to obtain replacement parts worth about 400,000 yuan (US$64,117).
The five suspects were arrested this month after Apple reported to local police it had received the fake iPhone 4S components from a distributor in the Chinese city of Wenzhou also charged with repairing iPhones.
The replacement parts were likely used by local retailers to assemble refurbished iPhones so that they could be sold as brand new to unsuspecting consumers, said police from Wenzhou's Lucheng district in an online statement.
The scam, which started in December, involved the suspects using their credentials as official iPhone distributors to submit an order to Apple for 121 iPhone 4S BAND parts. These BAND parts make up the iPhone's core components, but exclude its battery and back cover. One BAND unit alone can cost over 3000 yuan ($480).
The suspects allegedly made the order by submitting serial numbers of 121 genuine iPhone 4S handsets, and fabricating faulty problems for the devices. The suspects then supplied Apple with a batch of fake iPhone BAND parts that police said had little value. To avoid detection, the suspects went as far as to print the real iPhone serial numbers on to the fake BAND components.
The iPhone distributors had initially denied any wrongdoing, but police caught on to the scam after it was found that 118 of the 121 iPhones reported faulty were activated on Dec. 20, and contained the identifier "C8PJ" in their serial number. Police said there was little chance for so many of the same phones to be in need of repair. The suspects had also filed for the replacement order on Dec. 28 and 30, just under Apple's 15-day threshold for free returns on products.
Police said that Apple alerted the authorities in January, but that they had so far failed to recover the stolen components. The BAND parts could be used to help scammers make a profit of 1000 yuan on each refurbished iPhone sold, police said.
Apple did not respond to a request for comment on Monday.