Wholesaling iPhones

[Jakeglea90]

Jurisdiction

California

Hello,

Thanks for anybody who is able to reach out and provide clarification. My company operates in an industry of wholesaling iPhones and other electronics. With wholesaling iPhones comes the responsibility to check and vet the devices to make sure they are legitimate and aren't "blacklisted". You can do this with a series of tools online or via the carriers from whom the devices were purchased.

Devices are blacklisted because of three reasons: they were lost, stolen, or obtained fraudulently through carriers not paid for.

The part that makes this area a little gray and confusing is the fact that anybody can misplace their device, report it to their carrier to blacklist it, then find it later and resell the device. Using a tool like checkmend.com that communicates directly with government databases on stolen property they are able to offer an expansive report on the device that would uncover any police reports attached to it.

If we were to purchase blacklisted devices that after running through checkmend.com say there are no police reports attached and only show that it was blacklisted through the carrier, could we be opening ourselves up to any civil or criminal liabilities? If using checkmend and identifying that there are no police reports attached would this help in being our "due diligence"?

Some big box names like Gamestop via their wholesale.gamestop.com website have in their fineprint that all the devices are ran through this checkmend tool:

"CheckMEND has been run on all units to ensure product has not been reported stolen. The IMEI/ESN's are not tested for network activation eligibility. Units may or may not be eligible to be activated or unlocked from a particular network. Product is sold "as is" and returns for IMEI/ESN reasons will not be accepted."

Thank you all for your help regarding this, it's been quite a confusing and gray area of this industry.

 

[flyingron]

Unless you are reckless in trying to discover if the phone is stolen or if you hold or sell it after you know it is stolen, you're not going to be criminally liable.

You certainly are going to have potential civil liability if you sell a phone to someone who is not able to obtain service for it because of it being blocked. This is the risk you face in such a business.

 

[Jakeglea90]

We don't deal with them, but it's a hot topic within our industry. They're typically resold for parts. If we were to run reports on the devices using that checkmend database and we see it is only blacklisted by the carrier and no police or theft reports are tied to the device would it still be receiving stolen property?

 

[Jakeglea90]

Unless you are reckless in trying to discover if the phone is stolen or if you hold or sell it after you know it is stolen, you're not going to be criminally liable.

You certainly are going to have potential civil liability if you sell a phone to someone who is not able to obtain service for it because of it being blocked. This is the risk you face in such a business.

The checkmend reports when ran only come up that it's blacklisted by the carrier. The "Lost" or "Stolen" sections of the report still show a checkmark and clear. I'm assuming this means there are no loss reports, or theft reports attached? This is the software even the police and government agencies use to check electronics.

 

[flyingron]

It's a crime to possess items you knew or reasonably should know are stolen. It matters little if you're going to sit on them or sell them intact or in parts.

 

[Michael Wechsler]

I'm actually in the mobile industry. Trying to sell blacklisted devices and parts it is quite rampant internationally as well.

In this regard it appears no different than the purchase and sale of other goods or contraband. Due diligence means more than running a check, as @flyingron alludes. If you're paying a price that is below market and have reason to suspect that the phones and/or phone parts may be stolen goods (such as buying two dozen) you may run into trouble.

As to what Gamestop is doing I can't say and know that they have some type of trade in program. The issue of whether a phone can be used on a network (IMEI/ESN) is different than stolen and often - when being sold on sites such as e-Bay - reflects an obligation for which the legal purchaser has not fulfilled with the mobile carrier. For example, T-Mobile or Verizon Wireless will sell an iPhone at a discount to a customer with a 2 year agreement, after which being paid off, the phone is unlocked and may be used on any carrier and/or for another customer. Unless the customer pays off the terms of the contract, the phone should remain locked (and potentially blacklisted as well but we won't get into that here.)

I cannot and won't tell you what to do - but if you're in the industry selling phones and can easily test an IMEI or ESN (which you can), then you may be asking for trouble not taking such a precaution. If you don't have issues with law enforcement you may have it with unhappy customers who find out after purchase that their phone doesn't work as they anticipated it should, purchasing it from what they thought was a dealer with more sophisticated knowledge of how these things work. And once posted on social media or in a review, it could impact on your reputation. Legal recourse is doubtful, especially if your angry customers are telling the truth about what happened.