Apple Inc. (NASDAQ:AAPL) has uncovered an apparent scam involving its warranties in China. Five arrests were made in connection with the scam—ironically, on the same day the company apologized for its warranty practices and agreed to change them in the wake of reputation attacks by Chinese state-run media.
The reputation attacks against Apple by Chinese media were based on the company replacing defective phones that were still under warranty with devices that were new except for the back cover. That kept Apple Inc. (NASDAQ:AAPL) from being required to start the warranty period all over again.
Apple Inc. (NASDAQ:AAPL) was apparently targeted by the scammers throughout the month-long reputation attacks launched by Chinese media. Chinese police arrested five workers at an electronics store in Wenzhou which sells Apple Inc. (NASDAQ:AAPL) goods. The report of the alleged scam first appeared on the Chinese site TechWeb. It was then reported by The Register today.
The workers allegedly sent 121 fake iPhone 4S BAND components to Apple Inc. (NASDAQ:AAPL) and said they were damaged and needed to be replaced. The part they sent in was the main component of the iPhone, and it’s worth almost $500 (based on the current exchange rate for the Chinese yuan).
The scam revolved around turning in those fake components so that Apple Inc. (NASDAQ:AAPL) would send them new ones. Then the alleged scammers would purchase other basic and less expensive iPhone components like a back cover and a battery so that they could build iPhone’s and sell them as new, turning a profit of around $160 in the process. This went on for about a month or so before Apple Inc. (NASDAQ:AAPL) caught on to what was happening.