Sprint wins $26.9M in Maryland cellphone trafficking case,
after losing in Kansas
By Mark Davis
June 04, 2018 06:22 PM
It's okay to sell a Sprint phone, but not if it still is Sprint's phone.
A federal judge in Maryland has awarded Sprint $26.9 million on that basis in one of the company's many cellphone trafficking lawsuits around the nation.
Sprint had sued Wireless Buybacks LLC, Wireless Buybacks Holdings LLC and others on the grounds that they had interfered with Sprint's contracts with its customers. Sprint claimed the companies enticed consumers to sell their phones while still under contract with Sprint.
But Sprint hasn't won all of those trafficking lawsuits — losing in particular to a Kansas City, Kan., man after a five-year court battle. And the attorney for the two Maryland companies said he plans to appeal.
Charles R. Price, who represented the Wireless Buybacks firms, said the appeal will be based on the same "contract question" that prevailed in the Kansas City, Kan., case won by Brian Vazquez and his company, Middle Man Inc.
"It's the same issue that we had to win on appeal in Middle Man," said Price, who worked on the Middle Man appeal.
Middle Man originally lost in federal court and was ordered to pay a symbolic $1 in damages to Sprint. Vazquez, nevertheless, appealed. The U.S. Court of Appeals for the 10th Circuit held that Sprint's contract was ambiguous and sent the case to the jury, which sided with Middle Man.
The Maryland judge knew all about the Middle Man case, said Jay Heidrick, an attorney with Polsinelli representing Sprint in the Maryland Case.
"The judge considered that opinion and still found that the contract was not ambiguous and Buybacks tortuously interfered with it," Heidrick said.
Heidrick also said that the Middle Man and Maryland cases involve similar contract language but different sets of facts.
At the heart of the Maryland case is Sprint's contract with consumers who bought cellphones from Sprint at heavily subsidized prices. Sprint, like other carriers at the time, sold phones at deeply discounted prices along with a 2-year wireless service contract. Sprint recovered the cost of the phones throughout the 2-year deals.
Heidrick said Sprint's contract prohibited the consumers from selling the phones during the contracts. He said most of those who sold their Sprint phones to Wireless Buybacks were not only still on contracts, but also failed to fulfill them.
Only a few of the customers, he said, continued to pay off the service contract, allowing Sprint to recover the costs of the subsidized phone sale.
"For our damages analysis, we threw those out the window," Heidrick said.
Sprint no longer sells phones that way, switching instead to phone leases. The lease allows the customer ultimately to buy the device, and can lead the consumer to pay for more than the device cost.
The resale issue continues with the leases, a Sprint spokeswoman said, because the lease agreement says the customer does not own the device "until all financial obligations have been fulfilled."
Subsidized phone sales also are largely dead within the industry as AT&T, Verizon and T-Mobile typically sell phones on installment contracts independent of their service agreements with customers.
Sprint also lost in a Florida cellphone trafficking lawsuit but said in 2014 that it had won more than $93 million in judgments in such cases.
U.S. Attorneys » Southern District of New York » News » Press Releases
Department of Justice
U.S. Attorney’s Office
Southern District of New York
FOR IMMEDIATE RELEASE
Wednesday, August 29, 2018
Vendors, Consultants, And School Administrator Charged In Wide-Ranging Scheme To Defraud Federal “E Rate” Subsidy Program
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney, Assistant Director in Charge, Federal Bureau of Investigation (the “FBI”), David L. Hunt, Inspector General of the Federal Communications Commission (the “FCC-OIG”), and Thomas P. Zugibe, the District Attorney for Rockland County, announced today the return of an Indictment charging SIMON GOLDBRENER, a/k/a “Simon Goldbrenner,” a/k/a “Shimon Goldbrenner,” PERETZ KLEIN, SUSAN KLEIN, a/k/a “Suri Klein,” BEN KLEIN, a/k/a “Benzion Klein,” a/k/a “Benzi Klein,” MOSHE SCHWARTZ, SHOLEM STEINBERG, and ARON MELBER, a/k/a “Aharon Melber,” with conspiracy to commit wire fraud and wire fraud charges in connection with the federal program known as “E Rate,” which provides subsidies for affordable telecommunications equipment and related services to qualified schools This case has been assigned to United States District Judge Kenneth M. Karas.
Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, for years, these defendants stole money from the E Rate program, billing the E Rate program for equipment and services which were not in fact provided. The defendants allegedly fraudulently obtained millions of dollars in E Rate funds to which they were not entitled, and which should lawfully have been spent to help provide access to technology to educate underprivileged children. This indictment is important not only because fraudsters should be held to account for their crimes, but also because the next generation of students should have access to telecommunication services, internet access, and related equipment, irrespective of their means and in spite of the fact that people like the defendants seek to line their own pockets at the expense of underprivileged children.”
FBI Assistant Director in Charge William F. Sweeney said: “Schools have to fight for every dollar these days to supply their students with the high-tech, expensive equipment and technology they need in this day and age to succeed in life. The suspects in this investigation allegedly used funding from a program designed to give underprivileged schools internet access to pad their own bank accounts. To add insult to injury, school officials, who see the day-to-day struggle to even find money for pencils and paper, were allegedly involved in the scheme. The FBI and our law enforcement partners will hold these criminals accountable, and stop others from defrauding not only the government and tax payers, but students who depend on these programs to get a better education.”
Rockland County District Attorney Thomas P. Zugibe said: “These individuals concocted a scheme that not only defrauded taxpayers, but also deprived local students of access to affordable technology equipment and Internet service. In short, the defendants are accused of shamelessly stealing millions of federal dollars earmarked to broaden young minds. The Rockland County District Attorney's Office will continue to work collaboratively with the U.S. Attorney and FBI to root out fraud and abuse - especially misconduct that impacts children. Offenders must be dealt with swiftly to prevent further fraud of this magnitude from occurring.”
According to the allegations made in the Indictment:
The E Rate distributes funds to schools and libraries mostly serving economically disadvantaged children, so that those institutions can afford needed telecommunication services, internet access, and related equipment. Over 30,000 applications from schools and libraries seeking funds to serve economically disadvantaged children were received each year during the relevant time period; every year, requests for E Rate funds have exceeded funds available. In order to obtain those funds, educational institutions certify that they are purchasing equipment and services from a private vendor; if approved, the program defrays the cost by up to 90%. The educational institution is supposed to enter into an open bidding process in order to select a vendor, and the educational institution and vendor submit a series of certifications that they comply with a number of requirements of the E Rate program. A school applying for E Rate funds may employ a consultant, but that consultant must be independent of the vendors competing to sell E Rate funded equipment and services.
PERETZ KLEIN, SUSAN KLEIN, BEN KLEIN, and SHOLEM STEINBERG (collectively, the “Vendor Defendants”) held themselves out as vendors to schools participating in the E Rate program. Corporations controlled by the Vendor Defendants requested over $35 million in E Rate funds, and received over $14 million in E Rate funds, from in or about 2010 to in or about 2016.
SIMON GOLDBRENER and MOSHE SCHWARTZ (collectively, the “Consultant Defendants”) held themselves out as consultants who assisted educational institutions that desired to participate in the E Rate program. The Consultant Defendants, and individuals acting at their direction, completed and filed E Rate documents that resulted in the payment of millions of dollars in E Rate funds to the Vendor Defendants.
ARON MELBER is an official at a private religious school in Rockland County, New York. MELBER and his school have participated in the E Rate program with certain of the Vendor Defendants and Consultant Defendants, and filed certifications purporting to have obtained authorized E Rate funded equipment and services from Vendor Defendants selected through a fair and open bidding process. From in or about 2009 through in or about 2015, MELBER’s school received over one million dollars in E Rate funds.
From at least 2009 up to and including 2016, certain private religious schools, including MELBER’s school, sought and received E Rate funds for the purpose of paying the Vendor Defendants for equipment and services that the schools, the Vendor Defendants, and the Consultant Defendants falsely claimed the Vendor Defendants had provided to the schools.
However, the schools never received millions of dollars’ worth of these items and services. In other cases, the schools, Vendor Defendants, and Consultant Defendants requested hundreds of thousands of dollars of sophisticated technology that served no real purpose for the student population. For example, from 2009 through 2015, one day care center that served toddlers from the ages of 2 through 4 requested over $700,000—nearly $500,000 of which was ultimately funded—for equipment and services—including video conferencing and distance learning, a “media master system,” sophisticated telecommunications systems supporting at least 23 lines, and high-speed internet—from companies controlled by PERETZ KLEIN and SUSAN KLEIN, using the Consultant Defendants as their consultants. In still other instances the schools received equipment and services that fulfilled the functions for which the schools had requested E Rate funds (such as providing the school with internet access), but the schools, Vendor Defendants, and Consultant Defendants materially overbilled the E Rate program for the items provided, in order to enrich themselves at the expense of the underprivileged children the program was designed to serve.
As alleged, the defendants also perverted the fair and open bidding process required by the E Rate program. The Consultant Defendants—who held themselves out in filings as independent consultants working for the schools, but, in truth, worked with and for the Vendor Defendants—and the Vendor Defendants presented the schools with forms to sign or certify, awarding E Rate funded contracts to the Vendor Defendants. As a result of false and misleading E Rate filings, the Vendor Defendants received millions of dollars in E Rate funds for equipment and services that the Vendor Defendants did not in fact provide and which the schools did not use, and the Consultant Defendants accepted payments totaling hundreds of thousands of dollars from the Vendor Defendants, despite falsely presenting themselves as independent of the Vendor Defendants.
In return for their participation in the scheme to defraud the E Rate program, certain schools and school officials received a variety of improper benefits from the Vendor Defendants, including: a percentage of the funds fraudulently obtained from E Rate for equipment and services that were not in fact provided to the schools; free items paid for with E Rate funds but not authorized by the program, such as cellphones for school employees’ personal use and alarm systems and security equipment (which the E Rate program does not authorize) installed at the schools; and free services for which the E Rate program authorizes partial reimbursement (such as internet access) but for which the Schools did not—contrary to their statements in filings—make any payment at all.
The defendants and the counts with which they are charged in the Superseding Indictment are set forth in the attached list.
Mr. Berman thanked the FBI, the FCC-OIG, and the Rockland County District Attorney’s Office for their outstanding work on the investigation. This case is being handled by the Office’s White Plains Division. Assistant United States Attorneys Michael D. Maimin, Hagan Scotten, and Vladislav Vainberg are in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
USAO - New York, Southern
Press Release Number:
Updated August 29, 2018
Department of Justice
U.S. Attorney’s Office
District of Idaho
FOR IMMEDIATE RELEASE
Thursday, August 23, 2018
Sixteen Treasure Valley Residents Indicted in Federal Court
OCDETF Investigation Results in Six Drug Distribution Indictments and Ten Others Separately Charged in Multi-Million Dollar Counterfeit Cellphone Scheme.
BOISE – A multi-faceted, large-scale Organized Crime and Drug Enforcement Task Force (OCDETF) investigation has resulted in the federal indictment of sixteen defendants on drug trafficking, fraud, money laundering and counterfeit goods trafficking charges, U.S. Attorney Bart M. Davis announced. The indictments were issued last week by a federal grand jury sitting in Boise.
The grand jury returned a thirty-four count indictment charging Pavel Babichenko, Gennady Babitchenko, Piotr Babichenko, Timofey Babichenko, Kristina Babichenko, Natalya Babichenko, David Bibikov, Anna Iyerusalimets, Mikhail Iyerusalimets and Artur Pupko with conspiracy to commit wire fraud, mail fraud, conspiracy to traffic in counterfeit trademarked goods and money laundering conspiracy, all in connection with the online sale of counterfeit cellphones and accessories.
According to the indictment, the ten defendants operated a multi-million dollar scheme wherein they sold counterfeit cellphones and cellphone accessories on Amazon.com and eBay.com that the defendants misrepresented as new and genuine Apple and Samsung products. The indictment alleges that these counterfeit cellphones and cellphone accessories were obtained in bulk from manufacturers in Hong Kong, repackaged in the Treasure Valley, and then individually resold to consumers online as genuine and new. The indictment also alleges the defendants laundered millions of dollars in proceeds from the fraudulent scheme.
If convicted, the defendants face up to 20 years’ imprisonment and a $250,000 fine on the money laundering, wire fraud, and mail fraud counts. They face up to 10 years’ imprisonment and a $5,000,000 fine on the counterfeit trademark goods trafficking counts. Reference is made to the indictment and court record for further information. Additionally, anyone who believes they may be a victim may visit the Department of Justice’s large case website for more information: www.justice.gov/largecases.
In a separate series of cases stemming from the same OCDETF investigation, the grand jury returned six indictments charging six persons with violations of the Controlled Substances Act:
Tetyana Vasilevna Andriychuk, distributing heroin;
Jeffrey Scott Davis, distributing methamphetamine;
Pavel Matlashevsky, two counts of distributing heroin;
Alexandr Stricharskiy, three counts of distributing methamphetamine;
Sergey Zagorodny, distributing cocaine and sale of a firearm to a prohibited person; and,
Vadim N. Dmitruk, possession with intent to distribute heroin.
Drug distribution charges carry mandatory minimum prison sentences depending on the amount and type of drugs distributed. Maximum prison sentences range from up to 20 years all the way to life. The OCDETF investigation also included several other persons who were charged earlier with violations of the Controlled Substances Act:
James Peirsol pleaded guilty to distributing methamphetamine and was sentenced to 200 months in prison on October 19, 2017;
Blake Anthony Vanhoff pleaded guilty to distributing methamphetamine and was sentenced to 66 months in prison on November 14, 2017;
David Lon Rose pleaded guilty to distributing methamphetamine and was sentenced to 24 months in prison December 7, 2017; and,
David Duane Gudgel pleaded guilty to distributing methamphetamine and possession of a firearm in furtherance of a drug trafficking crime and was sentenced to 210 months in prison on May 2, 2018.
"Combatting transnational organized crime is one of the FBI's top priorities, and these cases demonstrate that the FBI remains committed to holding accountable all those who attempt to defraud U.S. citizens and U.S. companies, distribute illegal drugs, or conduct illegal activity simply to enrich themselves,” said FBI Special Agent in Charge Eric Barnhart. "From the arrests, to the millions of dollars in assets forfeited, the law enforcement agencies who participated in this investigation were able to deliver a decisive blow to these criminal enterprises because of the excellent, collaborative, working relationships that exist here in Idaho, and our strong international partnerships with law enforcement around the world. Thank you to everyone who worked tirelessly over the last four years to secure these indictments and arrests."
“Counterfeit products pose serious safety risks as they are often unregulated during manufacturing,” said Brad Bench, Special Agent in Charge of Homeland Security Investigations (HSI) Seattle. “This investigation represents HSIs commitment to protecting the public from criminals who are profiting to the detriment of their consumers.”
“The priority of the United States Postal Inspection Service is to investigate any crimes in which the U.S. Mail is utilized even if the scheme originally started over the phone or through the internet,” said United States Postal Inspection Service, Inspector in Charge Tony Galetti. “Our mission is to protect customers, business partners, and the Postal Service from illicit use of the mail. We will continue efforts to ensure the integrity and security of the United States Postal System and to hold accountable those who unlawfully take advantage of the Postal System. We would like to thank the United States Attorney’s Office for the District of Idaho for their incredible prosecutorial support throughout the course of this investigation. We also want to thank our federal law enforcement partners as well as our state and local partners for their dedication and collaborative efforts. The federal government is dedicated to dismantling sophisticated mail fraud schemes and the importation of counterfeit goods.”
“The United States Attorney’s Office is committed to the comprehensive investigation and prosecution of criminal activity that is harmful to our country, communities, and members of our society, all of whom we are sworn to protect,” said U.S. Attorney Bart Davis. “The dedicated women and men of my office have always, and will always, seek to hold accountable those who engage in fraud and illegal drug trafficking. These prosecutions demonstrate our commitment to prosecuting those who seek to profit at the expense of others, be it by fraudulent conduct or selling harmful, illegal drugs to others. In addition, the type of fraud involved here hurts not only the thousands of unsuspecting consumers who purchased counterfeit goods, but also the company – the trademark holders. Counterfeited products degrade the goodwill of the trademark holders, deceive consumers, and pose a serious safety risk to the community.”
These indictments are the result of a joint investigation by the Organized Crime and Drug Enforcement Task Force comprised of the Federal Bureau of Investigation, Drug Enforcement Administration, Bureau of Alcohol, Tobacco, Firearms and Explosives, Immigration and Customs Enforcement Homeland Security Investigations, Internal Revenue Service and United States Marshals Service. These federal agencies were joined in the investigation by the United States Postal Inspection Service, National Insurance Crime Bureau, U.S. Customs and Border Protection, Hong Kong Police Force, Boise Police Department, Meridian Police Department, Nampa Police Department and the Idaho State Police.
An indictment is merely an allegation and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.
Police & Fire
Pair Busted In $15,000 Cell Phone Delivery Scheme: Greenwich PD
The accused allegedly had cell phones fraudulently sent to Greenwich addresses.
By Alfred Branch, Patch Staff | Mar 21, 2018 12:09 pm ET | Updated Mar 21, 2018 12:31 pm ET
GREENWICH, CT — A pair of New Jersey men were arrested on second-degree larceny and conspiracy charges Tuesday after Greenwich police said the department was tipped off that the two had fraudulently obtained nearly $15,000 worth of cell phones and had them shipped to Greenwich addresses.
Arrested were Derick Dimson, 28, of Newark, NJ, and Julius Kelly, 40, of Hillside, NJ.
Greenwich police had obtained information that the two would pick up a package containing the illegally procured cell phones from an address on Red Coat Lane, and officers apprehended them there at about 2:30 p.m. Kelly had driven to the location, and Dimson hopped out of the vehicle to retrieve the package.
In addition to the cell phones from the Red Coat Lane stop, police found more illegally obtained cell phones in their vehicle.
Bail for Dimson and Kelly were set at $25,000 each, and both remained in custody. They are scheduled to appear in Stamford Superior Court on April 4.
Department of Justice
U.S. Attorney’s Office
District of New Jersey
FOR IMMEDIATE RELEASE
Wednesday, October 18, 2017
Eleven Men Charged In $1 Million Cross-Country Scheme To Defraud National Cellular Provider
NEWARK, N.J. – Eleven men in New York, Connecticut, North Carolina and Florida were charged today for their roles in a scheme that used stolen identities to order smartphones and other electronic goods and then paid drivers with a parcel delivery company to divert those goods to members of the conspiracy, Acting U.S. Attorney William E. Fitzpatrick announced.
Eight defendants were arrested this morning. Arrantes Garrincha Green, a/k/a “Don Gucci,” a/k/a “Gucci,” 39, of Margate, Florida, and Helton Arando Mallette, 27, of Miami, Florida, will appear this afternoon before U.S. Magistrate Judge Edwin G. Torres in Miami federal court. Omar Kimani Forsythe, a/k/a “Biggs,” 26, and Elvis Anthony Prehay, 43, both of Tamarac, Florida, will appear before Judge Torres tomorrow.
Sheldon Andre Wellington, a/k/a “Shellinz,” 35, of Rockville Center, New York, and Kindley Michel, 36, of Spring Valley, New York, will appear this afternoon before U.S. Magistrate Judge Joseph A. Dickson in Newark federal court.
Troy Linton Cooper, 35, of East Hartford, Connecticut, will appear this afternoon before U.S. Magistrate Judge Robert Richardson in Hartford federal court. Dashawn Brown, 25, of Raleigh, North Carolina, will appear this afternoon before U.S. Magistrate Judge James E. Gates in Raleigh federal court.
Andre Donovan Duffas, 27, of Plantation, Florida, Jermaine Wilson, a/k/a “Budds,” 32, of Nanuet, New York, and Oneil Gentles, a/k/a “Daffy,” 40, of Bronx, New York, remain at large.
All 11 defendants are charged by indictment with one count of wire fraud conspiracy and one count of conspiracy to transport stolen goods in interstate commerce. Green is also charged with one count of aggravated identity theft.
According to the indictment:
From June 2015 through June 2017, the defendants and others, led by Green, allegedly conspired to steal electronic equipment, including new smartphones, from a national cellular service provider.
Members of the conspiracy used stolen personal identifiers and debit and credit card information to place orders with the victim company. Many of the orders were allegedly made using two cellular phones associated with Green.
Afterwards, members of the conspiracy, including Green, Duffas, Mallette, Prehay, Wellington, and Wilson, transmitted anticipated delivery dates and locations of the fraudulently-ordered products to other conspirators who were employed as drivers with a major parcel delivery company. These drivers, including Brown, Cooper and Michel, were paid to divert the products mid-delivery to other members of the conspiracy, including Duffas, Forsythe, Gentles, Mallette, Prehay, Wellington, and Wilson.
Proceeds generated through the scheme were shared by wire transfer or depositing the funds in designated bank accounts.
The scheme compromised the identities of hundreds of residents in multiple municipalities across multiple states, including Upper Saddle River, New Jersey, and caused losses in excess of $1 million to the victim company.
The count of conspiracy to commit wire fraud carries a maximum potential penalty of 20 years in prison. The count of conspiracy to commit interstate transportation of stolen property carries a maximum potential penalty of five years in prison. Both counts carry a potential fine of $250,000, or twice the gross gain or loss from the offense. The aggravated identity theft count carries a mandatory sentence of two years in prison, which must be served in addition to any sentence imposed.
Acting U.S. Attorney Fitzpatrick credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, with the investigation leading to the charges. He also thanked the Upper Saddle River Police Department, the Bergen County Prosecutor’s Office, the NYPD, the Westchester County District Attorney’s Office, the West Hartford Police Department and the Connecticut State’s Attorney’s Office, Hartford Judicial District, for their assistance.
The government is represented by Assistant U.S. Attorney Sammi Malek of the U.S. Attorney’s Office General Crimes Unit in Newark.
USAO - New Jersey
Press Release Number:
Updated October 18, 2017
Federal Court Issues $1 Million Contempt Award for Repeated Cell Phone Unlocking Misconduct
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.
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 cot 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.
Ace Wholesale's storefront in Taylor, Michigan