Chinese businessman jailed for 'white collar deviance' connected to €10m 'zombie' iPhone fraud

The court was told the fake or 'zombie' phones from China were exchanged under warranty for genuine iPhones, which were then sent to countries outside of the EU for resale.

A Dublin-based Chinese businessman has been jailed for seven years and nine months over a money laundering operation connected to an international €10m “zombie” iPhone fraud.

Chengwen Guo, aged 43, who was the “Irish representative of a transnational crime organisation,” pleaded guilty at Dublin Circuit Criminal Court to theft and money laundering offences on dates between 2021 and 2022.

Guo, of Ivy Exchange, Parnell St, Dublin, owned a number of mobile phone shops called Murray Mobile, which has eight shops in locations such as Blackrock, Dundrum, Sutton Cross, Ranelagh, and Newbridge. Guo has one previous conviction for having a false passport at Gatwick Airport, England, for which he received a custodial sentence of 13 months, the court was told.

The court heard three sums of money seized in January 2022 included €6,515 found in an Audi Q7 car registered to Guo; €143,245 at his home address; and €20,700 at Murray Mobiles on Main St, Dundrum, Dublin 14.

Three Rolex watches were also found when gardaí searched his Parnell St apartment in Dublin. His Audi has yet to be seized, the court heard.

Judge Martin Nolan described Guo as “a very energetic man” who had engaged in “very substantial criminal misbehaviour”. 

 “This man deserves a severe custodial sentence,” said Judge Nolan. The judge said it was “white collar deviance”. The judge said “there was a gap there,” and “the situation was found out”.

The court was told the fake or “zombie” phones from China were exchanged under warranty for genuine iPhones, which were then sent to countries outside of the EU for resale. The court heard 10,158 phones provided to Guo were last active mostly outside Ireland. The total retail value of the Apple products was €10,262,617.

Apple warranty

Detective Sergeant Robert Madden, of the Garda National Economic Crime Bureau, told the court that representatives from Apple Corporation were in court for the hearing.

The scheme operated on the basis of the Apple warranty on its phones. The fraud involved sending in fake iPhones for repair and then claiming a replacement under Apple’s one-year warranty scheme. These fake phone components would come from China, and would be assigned the EMEI number of a genuine iPhone when sent for repair. The replacement genuine iPhones would then be sent to Hong Kong for resale to countries outside the EU.

The phones in this case would be sent to a repair company in South Dublin, then they would be assigned an EMEI number of a genuine iPhone. Fonfix would deem the phone irreparable, and the phone would be replaced by Apple for a new one.

The court heard Guo also sold counterfeit Apple products such as power chargers, charging cables, and phone cases in his shops.

In July 2021, counterfeit Apple goods — including 15 damaged iPhones and sim trays — were found after a package was sent to Ireland addressed to “Johnny Cheng”, which the court heard was a name he used in Ireland for its simplicity rather than his Chinese name, at Murray Mobile in Main St, Dundrum.

“Test purchases” of counterfeit Apple goods were carried out at Murray Mobile shops in Frascati Centre in Blackrock and Newbridge. These had been manufactured in Asia and were purporting to be Apple, the court heard.

Gardaí commenced an investigation and searches of all eight Murray Mobile shops took place on January 10, 2022.

A significant quantity of products — the large majority being counterfeit — including power adaptors, wireless chargers, EarPods, and phone cases were found. The number ran to the thousands, and they were worth in the region of €270,000 retail value if real. These were cheaper to buy in Asia, and Guo was not authorised to sell Apple products, Det Sgt Madden told the court.

Little financial benefit

Last month his co-accused — who was an employee of Fonfix, a tech repair business in Sandyford — was jailed in the same court.

Lukasz Lupa, aged 45, of Kukukcza, Wagrowiec, Poland, was given a four-and-a-half-year prison sentence after pleading guilty to two counts of facilitating a criminal organisation on dates between June 5, 2019, and September 3, 2021, under Section 72 of the Criminal Justice Act 2006.

Lupa had claimed he did not know what he was doing was illegal and received little financial benefit for his part in the warranty fraud.

In sentencing last month, Judge Nolan noted that Lupa had to verify that there were defects in the phones. Apple were prepared to give replacement phones, and “there was an opportunity to abuse this scheme”. 

Thousands of phones replaced by Apple in the region of 8,000 to 10,000, the judge noted. “Apple lost considerably and others gained considerably,” he said.

The court heard Lupa alerted his boss with issues to say two of the phones had same serial number. Another text said: “We cannot send in two phones with the same EMEI.” 

The judge said Lupa spotted the difficulty in the fraudulent scheme and nothing was done. “This man acquiesced, and this scheme went on for a considerable period of time”, the judge said.

Lupa received five bottles of wine, gift cards, and other gifts for his part in the scheme but never received any money, the court was told.

Guo was assigned genuine EMEI numbers, and he then passed them on to Fonfix to get genuine devices under the Apple warranty scheme. The court heard 9,744 repair events were created for Murray Mobile and were replaced with new phones from Apple.

The phones bearing those EMEI numbers that were also assigned to the "zombie" phones were showing recent download activity by their owners as they were legitimate. Of the 10,158 phones provided to Guo, most the phones were last active mostly outside Ireland. Most of the replacement phones were sold in Hong Kong, but some were sold in the Russian market, the court heard.

Det Sgt Madden said Apple realised that the number of units Guo was sending in was unusually high.

He told Eoin Lawlor, prosecuting, the phones would not power on and a diagnostic could not be performed on them. The phones were submitted without proof of purchase in name of a company which runs a legitimate business and was not at fault, the court heard. Guo received brand new phone and was getting €30 to €40 per unit.

The court heard previously that 60% of the phones had component parts and 55% had been heavily modified.

Onsite audit

Of those 288 sent for examination and it was determined they were counterfeit. An onsite audit by Apple in 2021 took place, and gardaí then determined of the 10,677 devices being processed by Fonfix, only 133 had been originally purchased in Ireland. Some 9,761 had serial numbers which had shown downloads were continuing on the app store.

These EMEI numbers were related to real iPhones, and the "zombie" phones were not genuine iPhones because they would not be able to download apps.

All of the “zombie" phones had the same fault in that they did not power on and, therefore, could not go through diagnostics. Some of the phones were sent to the Czech Republic for screening, and it was determined they were not Apple products.

Guo was arrested at his home on September 11, 2024, and interviewed on nine occasions, where he accepted he was the owner of Murray Mobile. He said the cash taken from his shop was parents’ money. Guo said the money found in his home was his kids’ money, and the cash in the Audi was belonging to his business.

Det Sgt Madden agreed with Diana Stuart, defending, that Guo’s co-accused Lupa left jurisdiction, but the garda said there was no extradition and he had come back to be interviewed.

He also agreed Guo fully co-operated with them and, in May 2022, handed over the PIN to his phone to gardaí.

His apartment in Parnell St was the family home, and it was also searched. Guo’s family were there and fully co-operated with gardaí. All of them handed over their passports, phones and PIN numbers. He further agreed Guo was in custody since September 11, 2024.

Guo met his wife in Ireland 20 years ago. The court heard Fonua, an associated company of Fonfix, made a settlement with Apple Corporation for €2m.

“This man profited somewhat from his enterprise,” Ms Stuart put it to the garda. Det Sgt Madden replied that Guo was a “senior player” in the Irish operation.

Ms Stuart told the court in mitigation that Guo has four children. One is in boarding school in England, and one is in boarding school in Ireland. He also has a child in university in Edinburgh. His wife’s day-to-day living expenses are €1,000 a week, Ms Stuart told the court.

“A letter from her sets out her difficulty,” she added.

Judge Nolan said the appropriate global sentence was one of seven years and nine months.

The judge said Guo had lapsed into criminality, “used his stores to sell Apple products — but they weren’t Apple products”. Suspicions arose and further searches saw €164,000 found in criminal proceeds, as well as Rolex watches.

Further investigations showed Guo was “involved in a criminal scheme to defraud Apple”, the judge said. The judge noted 10,000 phones were given out in the warranty scheme with a value of €10m.

Judge Nolan noted his co-accused Lupa was a company supervisor, and Lupa had received a four-and-a-half year sentence. Judge Nolan said Guo “brought the funds”.

“Any scheme that cannot be defrauded is a scheme you cannot use,” said Judge Nolan. “There is always going to be weaknesses in a scheme,” he added.

The prosecution made applications for forfeiture of the cash sums involved and the Audi, which the court heard is in the possession of Guo’s wife, is also to be seized.