Operation Jailbreak guilty plea caps more than 3-year international cellphone trafficking probe
DETROIT — A Detroit-area man pleaded guilty Thursday to transporting stolen cellphones in interstate or foreign commerce. The guilty plea follows a more than three-year probe by special agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), dubbed Operation Jailbreak.
As part of the plea agreement, Jason Floarea, 29, of West Bloomfield, former president of ACE Wholesale, forfeits his interest in approximately $1,000,000 in seized funds and approximately $200,000 in assets. Floarea used ACE Wholesale to sell fraudulently-obtained cellphones. The phones were modified to function on any mobile network – a process known as “jailbreaking” – and subsequently shipped to overseas buyers at costs far more than retail.
During one 2012 outbound inspection, special agents discovered 10 boxes containing 300 cellphones, which were later determined to be obtained by fraud.
In 2012, HSI special agents searched heavily-fortified businesses, homes and warehouses belonging to Floarea in the Detroit-area and Atlanta. Special agents seized thousands of documents which detailed Floarea’s activities. Floarea’s Detroit-area and Atlanta offices were equipped with armed guards and bulletproof glass.
The investigation revealed that Floarea would obtain phones from straw purchasers who entered into cellphone contracts that provided buyers with phones at either no or low promotional costs, a practice called “credit muling.” Credit muling occurs when street vendors solicit persons to purchase cellphones in bulk by entering into contracts which they have no intention of fulfilling.
The investigation also revealed Floarea knowingly purchased phones that were either stolen or obtained by fraud. Once sold to overseas buyers, phones could fetch up to $3,000 each.
“These scams literally wreak havoc on local communities because they create incentives for unscrupulous individuals to engage all types of criminal activity to get their hands on phones,” said Marlon Miller, special agent in charge of HSI Detroit. “And once these phones are in the hands of overseas buyers, it’s virtually impossible to track them back to the individuals perpetuating these crimes.”
"I am extremely proud of the efforts of my department in assisting with a case that had such far-reaching implications,” said Chief Mary Sclabassi of the Taylor Police Department. “This reinforces that diligent police work at the local level can have a huge impact."
Floarea is scheduled for sentencing Jan. 7, 2015.
The following agencies assisted with the investigation: the Taylor and Romulus Police Departments and the Wayne County Airport Authority.
The latest industry studies estimate credit muling contributes to approximately $50 million in annual losses to the telecommunications industry. Analysts say stolen and lost cellphones cost American consumers up to $30 billion each year.
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