Mn iPhone-iPad fraud: FBI indicts 14 members of a criminal gang

Ruben Fields
November 17, 2019

Three brothers, Zhiwei Loop Liao, Zhimin Liao and Zhiting Liao, are allegedly the leaders of the scheme, and are accused of importing more than 10,00 counterfeit iPhones and iPads from China.

The three brothers are all naturalized USA citizens who were born in China. Those genuine electronics were then sent to China and sold at a premium, US Attorney Robert Brewer explained in a news conference.

While the roughly 10,000 devices involved corresponded to those owned by actual customers, authorities said that no personally identifying information or data was compromised in the scheme and that customers did not experience lapses in Apple service.

The scheme allegedly involved 14 people who now face tens of fraud, conspiracy, identity theft and money laundering charges.

Zhiwei Liao, 31, owned two cellphone fix businesses in San Diego, and headed up the illegal operation with his brothers, Zhimin Liao, 33, and Zhiting Liao, 30, according to the indictment.

"The manufacture of counterfeit goods - and their use to defraud US companies - seeks to fundamentally undermine the marketplace and harms innocent people whose identities were stolen in furtherance of these activities", Brewer said.

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'The United States Attorney's Office is fully committed to bringing to justice those who seek to damage American markets and consumers through the peddling of bogus products'.

The alleged ringleaders of the operation - Zhiwei, Zhimin and Zhiting Liao, all San Diego residents who are naturalized USA citizens born in China - were arrested by Federal Bureau of Investigation agents Wednesday morning, along with their wives, prosecutors said. More than $250,000 in cash and about 90 iPhones were seized according to the DoJ press release.

Investigators also served seven search warrants: five at San Diego-area homes and two at businesses run by two of the brothers, Freedom Restoration in Miramar and Mission Nails & Spa in Mission Hills. All but three of the 14 defendants are in custody: Xiamon Zhong, a 33- year-old Chinese national who is believed to be in China; Charley Hsu, 39, of San Diego; and Hyo Weon Yang, 31, of San Francisco.

iPhones and iPads has its International Mobile Equipment Identity (IMEI) and series that are unique 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 USA or Canada, according to the release.

The indictment describes how the alleged co-conspirators sent lists of fake identifiers to scheme participants in China, presumably so they could be etched into the fake phones and tablets.

One co-conspirator, Charley Hsu, even allegedly sent a text message to Zhiwei on September 12, 2015 saying the counterfeit phones "look so fake".

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