Xfinity Mobile Complaint Seeks to Thwart Trafficking in Stolen Phones
The device buyback website SellLocked.com, its affiliate Guru Holdings and their owner Jakob Zahara are perpetrators of an unlawful scheme to enrich themselves by stealing Xfinity Mobile phones and the financial incentives that are intended to benefit legitimate consumers who use XM’s network, alleged XM and its parent Comcast in an unfair competition, tortious interference and trademark infringement complaint Wednesday (docket 2:22cv1950) in U.S. District Court for Arizona in Phoenix. The complaint seeks injunctive relief, plus compensatory, consequential, statutory and special damages.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The defendants and their co-conspirators are handset traffickers who exploit XM’s financial incentives to acquire phones by using various unlawful methods to circumvent the policies and procedures put in place to protect XM and its legitimate customers, said the complaint. They then resell the unlawfully obtained phones for a“substantial profit,” it said. As a fraud-reduction policy, XM will ship phones only to the address where the XM customer receives Xfinity internet service, it said.
But the defendants are circumventing those measures by using fake or stolen identities to access customer accounts or to set up fraudulent accounts and opening accounts “for the sole purpose of obtaining as many phones as possible for resale,” said the complaint. In addition to adding phones to legitimate customer accounts without authority, the defendants sometimes use fraudulent identities and credit cards to pay for the phones, it said. As XM will ship phones only to a recognized customer account address, “traffickers will intercept the fraudulent orders from the delivery company or before delivery to the legitimate customer,” it said.
Under the scheme, XM phones are resold “multiple times, usually in larger and larger consolidated lots by and among various other handset traffickers who know or should have known the unlawful status” of the device, said the complaint. With each new sale, the price of the stolen XM phone goes up, “and a new round of traffickers knowingly profit” at the expense of Xfinity and its legitimate customers, it said.
The trafficked phones ultimately end up overseas “where they can be sold at higher prices than in the U.S. and where wireless service providers generally do not provide financial incentives to facilitate the acquisition of wireless handsets, said the complaint. The phones along the way must be unlocked so they will operate on a wireless network other than XM’s, it said. Though large quantities of XM phones are being acquired throughout the U.S., XM “has learned that a number of them are not being activated” for use on the XM network, it said.
The scheme “illicitly converts” XM’s “substantial investment” in its phones directly into profits for the defendants and their co-conspirators, said the complaint. Though each trafficker “may participate in less than all of the steps in the process” of unlawfully diverting XM phones, “they are necessarily reliant on their co-conspirators to obtain, purchase, sell, advertise, unlock, ship, repackage, and resell, to make money from the scheme,” it said.
In addition to XM, AT&T, T-Mobile, Sprint, Tracfone Wireless and Nokia “have all filed lawsuits in numerous federal courts across the country against handset traffickers engaged in the practice of defrauding legitimate consumers and the telecommunications companies,” said the complaint. Each of the companies has succeeded in obtaining final judgments in its favor, including permanent injunctions, the complaint said. Efforts to reach defendant Zahara or his representatives for comment were unsuccessful Thursday.