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Telecommunications Case Studies: 

              Surveillance photos at Ace Wholesale in Taylor, Michigan, taken by private investigator for Sprint as part of a lawsuit against Ace.


A Michigan man whom authorities say was a major player in the underground market for stolen smartphones pleaded guilty Thursday in federal court to trafficking stolen iPhones and other devices overseas, where they were sold for as much as $3,000 each.

Authorities say Floarea owned an electronics business called Ace Wholesale and used his storefronts in suburban Detroit and Atlanta to buy stolen smartphones in bulk and export them to other countries.

Authorities say Floarea bought the phones from thieves who stole them from consumers and retailers, often at gunpoint, and from con artists who bought the phones at steep discounts by agreeing to wireless contracts they had no intention of fulfilling.

Floarea hacked the phones' software to enable them to connect with wireless networks around the world, then shipped them as far away as Hong Kong, authorities said.

"These scams literally wreak havoc on local communities, because they create incentives for unscrupulous individuals to engage in all types of criminal activity to get their hands on phones," said Marlon Miller, special agent in charge of Homeland Security Investigations in Detroit, the unit that led the investigation into Floarea's business. "And once these phones are in the hands of overseas buyers, it's virtually impossible to track them back to the individuals perpetuating these crimes."

Authorities said Floarea was one of the country's most prolific phone traffickers, claiming that he was exporting thousands of phones that he knew were obtained by theft or fraud. Before a federal SWAT team descended in 2012, one Ace Wholesale storefront in a Detroit suburb attracted so many people bearing shopping bags stuffed with iPhones and iPads that managers installed a port-a-potty on the sidewalk.

Once inside the store, people deposited stolen phones into a rotating drawer below a bulletproof glass window and waited for the cashier to deliver stacks of cash. So much money changed hands in this fashion at the Ace Wholesale storefront in Taylor, Michigan that an armored truck arrived each morning to deliver fresh bundles of cash, according to a private investigator for Sprint.

 
 

 
Sprint has filed a lawsuit against Ace Wholesale, accusing Floarea's business of depriving the wireless company of revenue from monthly phone bills by shipping phones overseas. The suit is still pending.

Floarea's guilty plea follows a three-year investigation by Sprints Private Investigators and Special Agents with U.S. Immigration and Customs Enforcement called "Operation Jailbreak." The investigation led to the arrest of a dozen other people who sold stolen phones to Ace Wholesale. As part of a plea deal, Floarea lost $1 million in seized funds and about $200,000 in assets. He could face up to 18 months in prison when he is sentenced in January.

Ace Wholesale's storefront in Taylor, Michigan


Federal Court Issues $1 Million Contempt Award for Repeated Cell Phone Unlocking Misconduct
03.31.2016
By James B. Baldinger, Matthew E. Kohen, Aaron S. Weiss

On March 18, United States District Judge Ursula Ungaro of the United States District Court for the Southern District of Florida entered an order against a  Hong Kong-based company that was improperly distributing prohibited cell phone unlocking solutions and imposed a damages award of $1 million. The case, TracFone Wireless, Inc. v. Technopark Co., Ltd., et al., 2016 WL 1127833 (S.D. Fla. Mar. 17, 2016), was originally filed by TracFone against Technopark on January 4, 2012. TracFone sued Technopark for its conduct related to the sale and distribution of devices capable of unlocking TracFone cell phones for use on other carriers’ wireless networks without TracFone’s authorization. TracFone subsequently obtained a final judgment and permanent injunction against Technopark, which prohibited the company from engaging in the sale or distribution of prohibited unlocking devices at any point in the future. 

In February 2016, after discovering that Technopark had renewed its illicit activities and was again engaging in the sale and distribution of a device capable of unlocking TracFone cell phones, TracFone moved to hold Technopark in contempt for its violation of the court’s permanent injunction. While Technopark is based in Hong Kong, it was working with companies around the world to carry out its improper activities, including one company based in South Florida. The court found that Technopark’s “Prohibited Unlocking Device Selling Scheme” violated the permanent injunction and held Technopark in contempt. The court granted TracFone’s motion, entered a damages award in favor of TracFone in the amount of $1 million, gave TracFone the opportunity to submit proof of additional damages.

TracFone’s substantial award is the latest of several Carlton Fields victories on behalf of many of the world’s largest wireless service providers seeking to prevent improper cell phone trafficking. Carlton Fields has represented telecommunications companies in hundreds of lawsuits against cell phone traffickers and unlockers across the country, resulting in nearly 200 final judgments and permanent injunctions, and over $800 million in damages awards.