Federal prosecutors filed felony fraud and money laundering charges earlier this week against a Michigan man accused of duping Apple into sending him more than 9,000 replacement iPod Shuffles.
According to court documents filed last week, Nicholas Woodhams of Kalamazoo, Mich., squeezed 9,075 iPod Shuffles out of Apple by entering real serial numbers on a company site that provides users with replacement iPods when theirs fail under warranty. He then turned the purloined iPods into cash by selling thousands of them for $49 each.
Woodhams ran an iPod repair business under the names iPod Mechanic, iMechanic and Pod Tradeup, operating websites under the first pair of names, the two-count complaint read. As of Friday, those sites were offline.
"Through trial and error, the defendant determined that he could guess valid, warranted serial numbers, and enter them into Apple's website for 'replacement' units without ever in fact purchasing or processing the 'original' units," the prosecutors said.
"On an almost daily basis during the course of the scheme, the defendant compiled lists of manufactured or 'guessed' Shuffle serial numbers that would be accepted by Apple's website, and dispatched them to part-time employees by hand or email," they added.
The government alleged that Woodhams ran the scam between March 2006 and October 2007, and sent more than 5,000 packages containing the stolen Apple hardware using the US Postal Service.
Woodhams used Visa-branded gift cards to handle the $1 pre-authorisation that Apple runs on credit cards submitted as part of the replacement process, and had the iPod Shuffles shipped to a box at a local UPS store. Although Apple later tried to charge the cards for the cost of the iPod when it didn't receive a broken device — also part of the swap process — the charges were rejected because the gift cards had already been exhausted.
Last June, Apple filed a lawsuit against Woodhams that said he had "fraudulently manipulated the Replacement Program" and asked the court to bar him from continuing his practice. Apple claimed then that it had been ripped off to the tune of $75,000. The case is now on hold as the federal criminal case moves forward.
Federal prosecutors have asked US District Court Judge Robert Bell to let them seize real estate and personal property — including a 2004 Audi and a 2006 drag racer — as well as more than $571,000 in cash belonging to Woodhams, all alleged to be proceeds from his scam.