More than a dozen people were changed in a massive counterfeit phone and tablet scheme, which the U.S. Attorney’s Office for the Southern District of California called the “biggest fraud of its kind.”
Three brothers, identified as Zhiwei Loop Liao, 31; Zhimin Liao, 33; and Zhiting Liao, 30, who are U.S. citizens born in China, are accused of orchestrating the scheme involving thousands of phones, authorities confirmed during a press conference Wednesday afternoon.
The trio and 11 other conspirators supposedly imported fake iPhones and iPads from China and would then take them to Apple stores around the U.S. and Canada, where they would then claim they were broken and exchange them for the real thing.
After receiving the authentic devices, they would then ship them to China and other foreign countries to sell at a premium, said FBI Special Agent in Charge Scott Brunner.
More than 10,000 devices were imported and exchanged. Apple estimated the scam cost them more than $6.1 million.
The charges for these individuals are conspiracy to committing mail fraud and wire fraud, conspiracy to traffic in counterfeit goods, aggravated identity theft and conspiracy to launder money, according to the indictment.
“While a significant amount of money in any circumstance, this prosecution is about more than monetary losses,” said U.S. Attorney Robert Brewer. “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.”
Investigators conducted seven search warrants at two businesses and five homes located in Mira Mesa and Mission Hills Wednesday morning. Investigators seized an estimated $250,000 in cash and 90 iPhones, said Brunner.
The Liao brothers – the alleged ringleaders – were arrested by FBI agents Wednesday morning along with their wives. Other defendants include mostly U.S. citizens from China, Vietnam and Russia.
By 12 p.m. Wednesday, 11 of the 14 defendants were 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, said Brewer.
“Today, FBI agents in San Diego, San Francisco, and Houston, along with law enforcement personnel and task force officers arrested 11 individuals related this indictment,” said Brunner. “Nine were arrested in San Diego, one in Houston, and one in San Francisco.”
The conference was held at the FBI San Diego field office, located on Vista Sorrento Parkway in Sorrento Valley, at 2 p.m.
Anyone with information on the whereabouts of the three fugitives can contact the San Diego FBI office at (858) 320-1800 or submit tips on the FBI website.