Date: May 31, 2024 Contact: newsroom@ci.irs.gov LOS ANGELES — Five Chinese nationals are scheduled to be arraigned today after their arrest on federal charges alleging they operated a large-scale, trans-Pacific counterfeit Apple Inc. device scheme that included the fraudulent returns of thousands of iPhones, iPads, and other Apple goods and caused the Cupertino-based technology company at least $12.3 million in losses. A federal grand jury charged the following defendants in a 22-count indictment that was returned on May 23 and was unsealed today: Yang Song of Corona, the alleged ringleader; Junwei Jiang of East Los Angeles; Zhengxuan Hu of Alhambra; Yushan Lin of Corona; and Shuyi Xing of Corona. All of the defendants are charged with one count of conspiracy to commit wire fraud and mail fraud, one count of aggravated identity theft, seven counts of wire fraud, 12 counts of mail fraud, and one count of conspiracy to traffic in counterfeit goods. They were arrested on Thursday and are expected to be arraigned this afternoon in United States District Court in downtown Los Angeles. “The defendants are accused of taking advantage of Apple’s customer-service policies to steal more than $12 million in merchandise,” said United States Attorney Martin Estrada. “Companies should not be victimized and defrauded for being responsive to customer needs, and these federal charges send a message that our office will take decisive action to uncover and prosecute those who perpetrate fraud.” “The defendants allegedly sought to introduce more than 16,000 fraudulent devices into Apple’s product line with the purpose of exchanging them for genuine devices to be sold for profit,” said Special Agent in Charge Tyler Hatcher, IRS Criminal Investigation (IRS CI), Los Angeles Field Office. “CI follows the money, and our expertise helps us safeguard U.S. businesses when faced with fraud. We are committed to our partnerships with fellow law enforcement agencies like Homeland Security Investigations to protect our country’s commerce ecosystem by investigating those who seek to take advantage of businesses’ consumer protection programs.” “Protecting American ingenuity, ensuring economic security, and shielding the consumers across the nation is a top priority for Homeland Security Investigations,” said HSI Los Angeles Special Agent in Charge Eddy Wang. “Due to the outstanding work of HSI Los Angeles with our law enforcement and private sector partners targeting this large-scale fraud operation, we have prevented millions of dollars from lining the pockets of this transnational criminal organization.” According to the indictment, from at least December 2015 to March 2024, Song and Jiang coordinated with co-conspirators in China to ship counterfeit Apple iPhones, iPads, and other devices to them and other U.S.-based co-conspirators. The counterfeit Apple devices shipped to Song, Jiang, and others in the U.S. were designed to look like genuine Apple devices and included identification numbers matching the numbers on real Apple products that had been sold in North America, were owned by real people, and were under warranty through Apple’s manufacturer warranty and AppleCare+, Apple’s extended warranty program. The defendants allegedly then fraudulently returned the counterfeit iPhones, iPads, and other devices to Apple as if they were genuine and had been legitimately purchased, were eligible for Apple’s warranty programs, and as if they were the lawful possessor of the Apple devices. The real identification numbers and serial numbers on the counterfeit devices that defendants allegedly retuned were designed to essentially impersonate the real Apple devices owned by real people throughout the United States, which defrauded Apple’s warranty programs and potentially deprived the Apple devices’ lawful owners of the warranty benefits to which they were entitled. The defendants allegedly knowingly and fraudulently represented that the counterfeit Apple devices they returned were genuine but were broken or non-operational and were covered by the company’s warranty programs. Some of the false reasons given to Apple store employees were because the devices purportedly would not power on, were physically damaged, or had other defects. But the defendants allegedly knew that the Apple devices they were returning were counterfeit and fraudulently used the identification numbers and serial numbers of real people’s Apple devices to victimize both Apple and the device owners. As part of the scheme, the defendants allegedly visited multiple Apple stores throughout Southern California, including Apple stores in Beverly Hills, Sherman Oaks, Pasadena, Irvine, Northridge, Manhattan Beach, Brea, Rancho Cucamonga, Cerritos and at shopping malls such as The Grove in Los Angeles, South Coast Plaza in Costa Mesa, Fashion Island in Newport Beach, and The Americana at Brand in Glendale. In many cases, they would drive all over Southern California in a single day and visit as many as 10 different Apple stores where they would allegedly return counterfeit devices. Once at the Apple stores, Apple employees then either replaced or repaired the counterfeit Apple device with a genuine Apple device in the same visit or, on other occasions, took the defendants’ counterfeit devices and ship them to a repair center. Apple then shipped to the defendants a genuine replacement Apple device or a repaired device to either an Apple store, where the defendants returned to pick up the new device or at the dozens of mailboxes that the defendants allegedly rented across Southern California. As part of the scheme, the defendants allegedly took multiple steps to disguise their identities and hide their fraud over the years. For example, they allegedly rented dozens of mailboxes at UPS stores across Southern California for use in the scheme, including to receive counterfeit devices from China and receive genuine replacement devices from Apple. They allegedly also misspelled the mailing addresses they provided to Apple and added or removed extra characters to the mailing addresses, to disguise the fact that they were processing numerous fraudulent returns of Apple devices. Other times, they allegedly used aliases to make appointments at Apple stores to process their fraudulent returns of devices. After successfully returning the counterfeit Apple devices for genuine ones, the defendants allegedly shipped the genuine devices to co-conspirators both in the United States and abroad, primarily in China, where the genuine Apple devices were resold at a substantial profit. In total, the defendants fraudulently returned and attempted to return more than 16,000 counterfeit Apple devices, causing Apple at least $12.3 million in losses. An indictment is merely an allegation, and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law. If convicted, the defendants would face a statutory maximum sentence of 20 years’ imprisonment on each of the conspiracy to commit mail and wire fraud, wire fraud, and mail fraud charges, a statutory mandatory minimum sentence of two years’ imprisonment for the aggravated identity theft charge, and a statutory maximum sentence of 10 years’ imprisonment on the conspiracy to traffic counterfeit goods charge. IRS Criminal Investigation (IRS CI) and Homeland Security Investigations are investigating this matter. The United States Postal Inspection Service and the Los Angeles Police Department provided substantial assistance. Assistant United States Attorney Andrew M. Roach of the Cyber and Intellectual Property Crimes Section is prosecuting this case. CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.
