Maryland Residents Sentenced for Multimillion-Dollar Scheme Defrauding Apple Inc. Out of Over 6,000 iPhones Two Chinese Nationals Sentenced to Prison Terms After Causing Apple an Actual Loss of Over $2.5 Million

In a major fraud case involving tech giant Apple, two Maryland residents, Haotian Sun and Pengfei Xue, were sentenced to federal prison for their roles in a sophisticated scheme that defrauded Apple out of millions of dollars’ worth of iPhones. Sun, 34, of Baltimore, was sentenced to 57 months in prison, while Xue, 34, of Germantown, was sentenced to 54 months. Both defendants, Chinese nationals, were convicted of conspiracy to commit mail fraud and mail fraud after a federal jury trial earlier this year.

U.S. District Court Judge Timothy J. Kelly handed down the sentences in the U.S. District Court for the District of Columbia, also ordering Sun to pay $1,072,000 in restitution and Xue $397,800. Upon release from prison, both will serve three years of supervised release. The sentencing marks the conclusion of a case that spanned years of investigation and prosecution, with significant cooperation between various law enforcement agencies, including the U.S. Postal Inspection Service and Homeland Security Investigations.

The fraud, which lasted from May 2017 to September 2019, involved the submission of counterfeit iPhones to Apple’s repair and replacement programs. Sun, Xue, and other conspirators arranged to receive large shipments of inauthentic iPhones from Hong Kong at various UPS mailboxes around the Washington, D.C. metropolitan area. These counterfeit phones were altered with spoofed serial numbers and IMEI numbers, making them appear as legitimate Apple products. The conspirators then submitted the fake devices to Apple retail stores and authorized service providers, including the Apple Store in Georgetown, to exchange them for genuine iPhones.

The Maryland scheme

Through this scheme, Sun, Xue, and their co-conspirators managed to submit over 6,000 inauthentic iPhones to Apple for repair or replacement. The intended financial impact of the scheme was approximately $3.8 million, while the actual loss incurred by Apple amounted to over $2.5 million.

The fraudulent operation was brought to light through an investigation led by the U.S. Postal Inspection Service’s Washington Division and Homeland Security Investigations’ Washington Field Office. Assistant U.S. Attorney Kondi J. Kleinman of the U.S. Attorney’s Office for the District of Columbia, along with Trial Attorney Ryan Dickey from the Criminal Division’s Computer Crime and Intellectual Property Section, led the prosecution. Paralegal specialists and legal staff provided essential support throughout the case.

After a three-and-a-half-day trial, the jury found both Sun and Xue guilty, resulting in their sentences. U.S. Attorney Matthew M. Graves and officials from the Justice Department’s Criminal Division emphasized the seriousness of the crime, which involved not only significant financial losses for Apple but also intricate methods of deception and fraud that targeted a major U.S. company.

The case highlights the federal government’s determination to hold accountable individuals who exploit technology companies for personal gain. This type of large-scale fraud, involving sophisticated counterfeit operations and international components, showcases the challenges companies like Apple face in protecting their products and services from fraudulent activities.