BOISE, Idaho — A federal jury in Idaho convicted five people for their roles in participating in a $41 million counterfeit cellphone scheme in 2018.
The scheme involved selling counterfeit cellphones and cellphone accessories on Amazon and eBay, in which the products were misrepresented as new and genuine products for Apple and Samsung devices, according to a press release from the United States Attorney's Office.
The defendants who were found guilty were:
- Pavel Babichenko
- Piotr Babichenko
- Timofey Babichenko
- David Bibikov
- Mikhail Iyerusalimets
According to the U.S. Attorney's Office, these five defendants were convicted of 24 counts of conspiracy to commit wire fraud, conspiracy to traffic in counterfeit trademarked goods, wire fraud, mail fraud and trafficking in counterfeit goods. All of these charges are in connection with the online sale of the aforementioned counterfeit cellphones and accessories.
The press release states two defendants in the case, Kristina Babichenko and Anna Iyerusalimets were not found guilty.
The five people convicted face up to 20 years of imprisonment and a $250,000 fine on the wire fraud and mail fraud counts, U.S. Attorney's Office reports. They also face up to 10 years of imprisonment and a $5 million fine on the trafficking in counterfeit trademarked goods counts.
Sentencing for those convicted is scheduled for November 2 and 3, 2022 before U.S. District Judge B. Lynn Winmill, the judge who presided over the trial.
In August of 2018, federal agents raided twelve homes, a business, a warehouse and a church in the Boise area, confiscating boxes of undisclosed evidence. At the time, 16 Boise-area residents were indicted on charges stemming from two federal investigations. One, involving the large-scale manufacturing and sale of counterfeit cell phones; the other, a cocaine, heroin and methamphetamine ring. That raid included agents from the U.S. Attorney’s Office, the Federal Bureau of Investigation, the Drug Enforcement Administration, the Department of Homeland Security, the Internal Revenue Service, the U.S. Postal Inspector’s Service Office, as well as officers from the Boise Police and Meridian Police Departments served search warrants on the aforementioned areas.
“The verdicts demonstrate the FBI’s unwavering commitment to combatting transnational organized crime which pose the greatest threat to the national and economic security of the United States,” said Special Agent in Charge Dennis Rice of the Salt Lake City FBI. “Our strong partnerships in Idaho and around the world are instrumental in dismantling these groups which seek to profit vast sums of money defrauding the American people and businesses.”
During the trial, which lasted nine weeks, the jury heard evidence that the defendants obtained counterfeit cellphones and cellphone accessories in bulk from manufacturers in China, which they would then repackage those goods in the Treasure Valley. After that, evidence showed the jury the defendants would individually resell these counterfeit items to consumers on Amazon and eBay as genuine, new items.
According to evidence shown during the trial, the defendants would continue to sell these items despite receiving numerous notices from U.S. Customers and Border Protection they were importing counterfeit items. The defendants also repeatedly ignored cease-and-desist letters from companies the counterfeit items were imitating, such as Apple and Samsung.
“These individuals scammed the public into buying fake electronic goods, endangering people with counterfeit products while diminishing trust in respected brands,” said Special Agent in Charge Robert Hammer, who oversees HSI operations in the Pacific Northwest. “The dedicated work of HSI agents through federal partnerships with the FBI, U.S. Postal Inspection Service, IRS-CI, U.S. Marshals Service, combined with our Idaho law enforcement partners the Treasure Valley Metro Violent Crimes Task Force, Ada County Sheriff’s Office, Boise Police Department, and the Meridian Police Department led to the disruption of this fraudulent transnational scheme.”
According to the press release, when companies like Amazon identified the defendants as sellers of counterfeit products and suspended their license to sell these items, the defendants would then submit fake invoices and plans of action to regain access to Amazon's platform and convince the company to release the proceeds of the scheme. This pattern lasted for around a decade, with the defendants changing company identities and tactics when confronted about their behavior.
United States Attorney Josh Hurwit made the announcement concerning the conviction of the defendants. Hurwit commended the cooperative efforts of the joint investigation led by the FBI and Homeland Security Investigations, along with IRS-CI, the U.S. Postal Inspection Service, and the U.S. Marshals Service. These federal agencies were joined in the investigation by the Treasure Valley Metro Violent Crimes Task Force, the Ada County Sheriff’s Office, the Boise Police Department, and the Meridian Police Department.
“By trafficking in counterfeit cellphones, chargers, and batteries, the defendants led an organized criminal conspiracy that violated intellectual property rights, cheated the American consumer, and endangered the safety of the public for their own financial gain,” said Hurwit. “The U.S. Attorney’s Office is committed to working with its federal law enforcement partners to identify, arrest, and prosecute those who defraud businesses and consumers in an attempt to line their own pockets. I want to thank the FBI and HSI special agents and analysts for their tireless work on this investigation and prosecution.”