Fourteen indicted in $6 million counterfeit iPhone and iPad scheme

A federal grand jury indictment was unsealed today charging fourteen alleged members of an international criminal organization with dozens of fraud, conspiracy, identity theft and money laundering charges related to their multi-million-dollar counterfeit iPhone and iPad scheme.

During a coordinated takedown that began early this morning, investigators executed 11 search warrants – including at two businesses plus several homes and vehicles located in Mira Mesa and Mission Hills – and seized an estimated $250,000 in cash plus 90 iPhones which are being evaluated to determine authenticity. As of today at noon, 11 of 14 defendants are in federal custody. Three are fugitives, including Xiamon Zhong, who is believed to be in China; Charley Hsu of San Diego; and Hyo Weon Yang of San Francisco.

Fugitives Xiamon Zhong, who is believed to be in China; Charley Hsu of San Diego; and Hyo Weon Yang of San Francisco
Fugitives Xiamon Zhong, who is believed to be in China; Charley Hsu of San Diego; and Hyo Weon Yang of San Francisco

According to the indictment, the organization – led by three brothers – imported more than 10,000 counterfeit iPhones and iPads from China, exchanged them for the real thing at Apple stores throughout the United States and Canada, and then shipped the authentic devices back to China and other foreign countries to sell at a premium.

Apple conservatively estimates that the loss associated with the counterfeit items that were fraudulently exchanged at Apple Stores for genuine Apple products exceeds $6.1 million.

“While a significant amount of money in any circumstance, this prosecution is about more than monetary losses,” said U.S. Attorney Robert Brewer, in a statement. “The manufacture of counterfeit goods – and their use to defraud U.S. companies – seeks to fundamentally undermine the marketplace and harms innocent people whose identities were stolen in furtherance of these activities. 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.”

FBI Special Agent in Charge Scott Brunner said in a statement: “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 international 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 Liao brothers – alleged ringleaders Zhiwei, Zhimin and Zhiting – were arrested by FBI agents this morning along with their wives. The brothers are naturalized U.S. citizens born in China. Other defendants include mostly U.S. citizens, mostly naturalized, from China, Vietnam and Russia.

According to the indictment, the Liao brothers directed other alleged conspirators to exchange counterfeit iPhones and iPads for genuine iPhones and iPads at Apple stores throughout the United States and Canada. Defendants intentionally damaged the counterfeit iPhones and iPads and fraudulently represented the counterfeit devices to be genuine Apple devices that were covered by an Apple warranty knowing that Apple would exchange damaged devices under warranty for new genuine Apple devices.

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. The counterfeit iPhones had IMEI and serial numbers that matched IMEI and serial numbers for genuine iPhones and iPads that were purchased and used by other persons and covered by an Apple warranty in the United States or Canada.

U.S. Attorney Brewer thanked lead prosecutor Tim Salel and agency partners, including the FBI, San Diego Police Department, U.S. Customs and Border Protection and Homeland Security Investigations, for their diligent pursuit of justice in this matter.

DEFENDANTS, Case Number: 19cr4407-BAS

Zhiwei Loop Liao, Age: 31, San Diego, CA
(Naturalized U.S. citizen born in China)

Zhimin Liao, Age: 33, San Diego, CA
(Naturalized U.S. citizen born in China)

Zhiting Liao, Age: 30, San Diego, CA
(Naturalized U.S. citizen born in China)

*Xiamon Zhong, Age: 33, China
(Chinese national residing in China)

Phillip Pak, Age: 31, Richmond, CA
(U.S. citizen)

Dao Trieu La, Age: 29, San Diego, CA
(Naturalized U.S. citizen born in Vietnam)

Mengmeng Zhang, Age: 28, San Diego, CA
(Lawful permanent resident. Chinese national)

Tam Thi Minh Nguyen, Age: 36, San Diego, CA
(Lawful permanent resident. Vietnamese national)

Deedee Zhu, Age: 32, San Diego, CA
(Naturalized U.S. citizen born in China)

Danny Tran Chan, Age: 29, San Diego, CA
(U.S. citizen)

*Charley Hsu, Age: 39, San Diego, CA
(Chinese national)

Jiaye Jiang, Age: 32, San Diego, CA
(Naturalized U.S. citizen born in China)

*Hyo Weon Yang, Age: 31, San Francisco, CA
(Naturalized U.S. citizen born in Korea)

Dmitri Pigarov, Age: 31, San Diego, CA
(Naturalized U.S. citizen born in Russia)

SUMMARY OF CHARGES

Title 18, U.S.C., Sec. 1349 – Conspiracy to Commit Mail Fraud and Wire Fraud
Maximum penalty: Twenty years in prison and a $12.2 million fine (twice the value of the gross loss to the victim, Apple, Inc.)

Title 18, U.S.C., Sec. 1343 – Wire Fraud;
Maximum penalty: Twenty years in prison and a $12.2 million fine (twice the value of the gross loss to the victim, Apple, Inc.)

Title 18, U.S.C., Sec. 1341 – Mail Fraud;
Maximum penalty: Twenty years in prison and a $12.2 million fine (twice the value of the gross loss to the victim, Apple, Inc.)

Title 18, U.S.C., Sec. 2320 – Conspiracy to Traffic in Counterfeit Goods;
Maximum penalty: Twenty years in prison and $500,000 fine

Title 18, U.S.C., Sec. 1028A – Aggravated Identity Theft;
Maximum penalty: Two years in prison (to run consecutively to any other term of imprisonment)

Title 18, U.S.C., Secs. 1956(a)(2)(A), and 1956(h) – Conspiracy To Launder Money;
Maximum penalty: Twenty years in prison and $500,000 fine

INVESTIGATING AGENCIES

• FBI
• San Diego Police Department
• U.S. Customs and Border Protection
• Homeland Security Investigations
• San Diego County Sheriff’s Department

*The charges and allegations contained in an indictment or complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Source: U.S. DEPARTMENT OF JUSTICE

MacDailyNews Take: If found guilt, prosecute to the fullest extent of the law.

25 Comments

  1. I remember when this country wasn’t polluted with third-world criminals aided and abetted by the Democrat party in a desperate quest for votes from those perpetually on the take. Immigration should be merit based. The U.S. should only take in the best and brightest, not thieving scum.

          1. I call it the Democrat Party on purpose. It’s called an epithet. I use it to disparage fools who belong to, support, or vote for idiots in the Democrat Party who do not understand the purpose of borders or controlling borders (unless it’s their own house or neighborhood, of course – those are surrounded by walls and guards).

            The U.S. should only take in the best and brightest, not thieving scum.

      1. Every independent study of crime statistics shows that native-born American citizens have a higher crime rate than undocumented aliens (apart from immigration offenses, of course). There is an even lower crime rate among naturalized citizens and lawful permanent residents. If you wanted to deport people to reduce the crime rate, you would have to begin with men born in America.

          1. Nope.

            Non-citizens constitute only about 7 percent of the U.S. population. Yet the latest data from the Justice Department’s Bureau of Justice Statistics reveals that non-citizens accounted for nearly two-thirds (64 percent) of all federal arrests in 2018. Just two decades earlier, only 37 percent of all federal arrests were non-citizens.

            These arrests aren’t just for immigration crimes. Non-citizens accounted for 24 percent of all federal drug arrests, 25 percent of all federal property arrests, and 28 percent of all federal fraud arrests.

            In 2018, a quarter of all federal drug arrests took place in the five judicial districts along the U.S.-Mexico border. This reflects the ongoing activities of Mexican drug cartels. Last year, Mexican citizens accounted for 40 percent of all federal arrests.

            In fact, more Mexicans than U.S. citizens were arrested on charges of committing federal crimes in 2018.

            Migrants from Central American countries are also accounting for a larger share of federal arrests, going from a negligible 1 percent of such arrests in 1998 to 20 percent today.

            U.S. Department of Justice: “Immigration, Citizenship, and the Federal Justice System, 1998-2018” report:
            https://www.bjs.gov/content/pub/pdf/icfjs9818.pdf

            1. Ah, the holy trinity: lies, damn lies, and statistics

              Your numbers are perfectly correct… for federal arrests. However, federal arrests are only a very small part of total arrests in the United States. When you take the much larger number of state crimes into account, the picture is exactly as I stated. My arrest numbers come from the Cato Institute, composed of people who wouldn’t vote for a Democrat if he was the only one on the ballot:

              https://www.cato.org/blog/illegal-immigrants-crime-assessing-evidence

              Why the difference from your numbers to mine? Most federal arrests of noncitizens are for immigration or smuggling offenses. Oddly enough, Customs and Border Protection focuses on customs and immigration violations near the border, and the other federal law enforcement agencies are heavily concentrated there, too. When they make an investigative stop for a possible CBP offense under the relaxed less-than-Fourth Amendment standards in the border zone, they often find drugs or evidence of other crimes (for example, immigration-related fraud). That’s why most federal arrests are near the border; the feds aren’t looking for smugglers in Kansas. It is also why people who do not appear to be American citizens get stopped—and subsequently arrested—more often than people who look like Ivanka Trump. Those factors apply much less to state arrests.

              My numbers are supported by an independent line of inquiry. Most American cities have a rising proportion of immigrants. If they were more likely to commit crimes, the crime rates would also be rising. In fact, they have a falling crime rate and some of the cities with the highest immigrant proportions are showing the fewest crimes. Cities on the US side of the Mexican border have the highest proportion of immigrants—naturalized, legal residents, or otherwise—yet they are among the safest places in America.

              https://www.themarshallproject.org/2018/03/30/the-myth-of-the-criminal-immigrant

        1. You lie.

          Non-citizens accounted for 24 percent of all federal drug arrests, 25 percent of all federal property arrests, and 28 percent of all federal fraud arrests.

          In 2018, a quarter of all federal drug arrests took place in the five judicial districts along the U.S.-Mexico border.

          Politicians who declare their jurisdictions to be sanctuaries for illegal immigrants who commit crimes are needlessly endangering their law-abiding citizens.

    1. As the U.S. finds itself with a President under investigation for misuse of office for personal political gain and who has a history of being a “thieving scum” by systematically not paying the hard working Americans he hires. Yeah, great stuff!

      1. The “whistleblower” is 33-year-old Eric Ciaramella.

        Ciaramella is a holdover from the Obama administration and a registered Democrat. He’s been accused of leaking like crazy. He worked with Joe Biden, he’s a vocal critic of President Trump, and he invited a DNC operative inside the White House to attend meetings. He also helped instigate the investigation into Russia collusion. So, of course, Democrats would believe his second-hand complaint about President Trump’s phone conversation with Ukranian President Zelensky over the actual transcript of the call itself.

        1. What part of

          “We need tthe money Congress approved in a bill you signed to buy Javelin antitank missiles to defend our nation from an ongoing Russian-directed insurgency.”

          followed immediately by

          “I would like you to do us a favor though.” (Said favor being an attack on the character of the President’s past and future political opponents.)

          is ambiguous about using government authority to solicit a private benefit? Nobody needs to believe the whistleblower when behavior that is a textbook example of corruption is right there in the White House summary of the call.

          1. In 2016 Ukrainian Prosecutor General Viktor Shokin, in his investigation of corruption involving Burisma Holdings, a natural gas company, identified Hunter Biden as the recipient of over $3,000,000 from the company.

            Not wanting this corruption exposed, Joe Biden swung into action, using US loan guarantees as hostage while demanding Shokin be fired.

            Joe Biden brags about his corrupt nepotistic actions wherein he abused his position as Vice President in order to get his coke addict son “jobs” via foreign governments looking for influence.

            1. Kind of curious how the State Department, the International Monetary Fund, and every country in Europe was demanding that the notoriously corrupt Shokin be fired. He was protecting the oligarchs, not investigating or prosecuting them. So the Vice-President wasn’t acting on his own. He was acting as an international spokesman, even though the honest prosecutor who followed Shokin would be MORE likely to investigate Burisma than Shokin (who had already wrapped up his investigation, possibly because he had been bribed to do so).

              Hunter Biden is a sleazy character. Everybody knows that, probably including his father. He should never have taken the Burisma gig while his father was acting as the point man on Ukraine for the US and Europe. However, Hunter got the job AFTER Joe took on the Ukraine issue (that’s why they offered Hunter the position); this is not a case of Joe taking on Ukraine to help Hunter.

              Damn right that the Vice-President bragged about getting rid of a crooked prosecutor. He had every right to do so.

              ALL OF WHICH IS BESIDES THE POINT. Even if we were to concede that both Bidens are crooked as hell, it still wouldn’t justify using the power of the presidency to obtain a personal political benefit.

          2. It is the President’s duty as America’s chief law enforcement officer to root out corruption, even if the corrupt persons are Democrats trading influence for vastly overpaid jobs for a politician’s unqualified adult child in Ukraine.

            1. If Trump wants to root out corruption, fine. There is no evidence, however, that he has ever shown any interest in rooting out corruption in Ukraine or anywhere else in the world except when he could use it to attack his American political rivals.

              To repeat: using your public office to seek a private benefit is the definition of corruption. The President personally released the transcript that showed himself doing exactly that. No amount of whataboutism (What about the Bidens? What about the whistleblower?) is going to alter that fact.

  2. Chinese scams are always amazing. They make counterfeit iPhones with real IMEI and real serial numbers, to be exchanged around the country, then shipped the real phones and tablets back to China. Amazing amount of effort for so little.

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