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Tipped off by a suspect buying hundreds of iPhones with Apple gift cards, police in Oregon have cracked down on an organized crime ring that they say was shipping handsets to Hong Kong where they were to be sold on the black market.
A man in Tigard, Ore., was spotted at the Washington Square mall on Dec. 4 suspiciously buying numerous iPhones with a stack of gift cards, according to the Portland Tribune. That led investigators to follow him to his car, where they found Apple Store shopping bags filled with more than 470 iPhones worth $290,000, and Apple gift cards totaling more than $585,000.
The man followed by police, along with an accomplice, agreed to cooperate to find more suspects involved in the scam. They directed police to a nearby FedEx store, where "hundreds of boxes of iPhones bound for Hong Kong" were seized.
It's believed that the scam was tied to stolen credit card numbers, which were then used to buy Apple gift cards. The iPhones were purchased from the Tigard Apple Store, as well as the Apple retail outlet at Bridgeport Village in Tualatin, Ore.
With an average selling price approaching $700, Apple's iPhones are valuable hot ticket items, which makes them ideal candidates for thieves and scammers. iPhone smuggling and black market sales are not new, though having them stolen and shipped from the U.S. is less common, with most high-profile scams emanating from overseas.
The relatively high cost of Apple's devices combined with the company's limited worldwide distribution network — Apple retail stores operate in just 16 countries — provides lucrative arbitrage opportunities for smugglers. Devices purchased legally in a more affordable jurisdiction can be resold, often for a huge profit, in places with higher import duties or limited points of purchase.
Hong Kong is the canonical example of such activity, given its low-tax regime and proximity to the booming mainland China market. Smugglers line up to purchase new Apple products in Hong Kong and sneak them over the border to avoid China's hefty import and luxury taxes.
Earlier this year, a man was arrested at the Hong Kong border while attempting to smuggle 94 iPhones into mainland China by taping them to his body. Border guards were alerted after the man exhibited a "weird walking posture" while approaching the checkpoint.