In a significant egg-on-the-face moment for the US military and armed forces, a few men from Florida could sell counterfeit IT products to some of the most brilliant minds running the US military. These counterfeit products eventually led to significant security lapses and were the targets of cybersecurity attacks.
Florida resident Onur Aksoy, also known as Ron Aksoy and Dave Durden, has been sentenced to 78 months in prison for setting up a rather elaborate counterfeit scam that generated $100 million in revenue from fake networking gear. As reported by Business Standard, the scammers sourced cheap, fake IT products from China and Hong Kong and passed them off as legitimate Cisco products, the US Department of Justice (DOJ) announced this Thursday.
Aksoy pleaded guilty to two counts of an indictment charging him with conspiring to traffic in counterfeit goods, mail fraud, and wire fraud. His sentence, handed down on May 1, includes paying Cisco $100 million in restitution, a $40,000 fine, and three years of supervised release.
Aksoy will also have to compensate his victims, with the amount to be determined by the court at a later date, the DOJ stated.
90% discount did not raise red flags
The indictment reveals that Aksoy began plotting the scam around August 2013, which continued until at least April 2022. Operating through numerous companies and online storefronts, including 15 Amazon and 10 eBay outlets, Aksoy sold tens of thousands of counterfeit computer networking devices sourced from China and Hong Kong, as per a report by The Economic Times
These products were falsely presented as new and genuine, using fake Cisco packaging, labels, and documents. Had these been legitimate, it would have cost the scammed customers over $1 billion, according to the indictment.
Government officials have expressed grave concerns over the scam’s impact on national security, with counterfeit Cisco gear being used in critical applications by the US military. Bryan Denny, special agent in charge of the US Department of Defense (DoD) Office of Inspector General, Defense Criminal Investigative Service in the Western Field Office, stated that Aksoy defrauded the Department of Defense by introducing counterfeit products into its supply chain and scamming them into buying these counterfeit products
These products, which routinely failed or malfunctioned, were found in various systems, including flight simulators for US Air Force F-15 and US Navy P-8 aircraft.
The Department of Justice’s announcement also revealed that Aksoy’s counterfeit devices found their way into critical military and governmental applications, including classified information systems.
Counterfeit, Chinese IT products used in American aircraft, infra
These fake products were used in both combat and non-combat operations of the US Navy, US Air Force, and US Army, supporting various aircraft such as the F-15, F-18, and F-22 fighter jets, the AH-64 Apache attack helicopter, the P-8 maritime patrol aircraft, and the B-52 Stratofortress bomber aircraft.
Furthermore, devices acquired through the scam were also discovered in hospitals and schools.
The DOJ did not provide specific details on how the US military procured counterfeit Cisco gear or the extent of fake technology obtained from Aksoy. However, the prevalence of suspicious tech listings on online marketplaces like Amazon and eBay raised concerns about government entities, particularly the military, acquiring gear through these channels.
There is also the possibility that buyers and resellers associated with government bodies directly purchase products from Aksoy’s Pro Network Entities.
Similar to other IT brands, Cisco has faced challenges with the grey market, where unauthorized entities sell counterfeit versions of their products. Cisco estimated that the IT grey market was costing its channel $1.2 billion annually, a figure exacerbated by the COVID-19 pandemic.
Even authentic Cisco channel partners have been found acquiring products outside of authorized channels due to the speed of transactions. While severe penalties exist for partners caught engaging in such practices, they are only banned from Cisco’s reseller program after a repeat offence.
In response to Aksoy’s activities, Amazon and eBay took action by removing listings from his storefronts and either suspecting or terminating his accounts, as outlined in the indictment. These measures aimed to curb the spread of counterfeit products and safeguard consumers from fraudulent schemes in online marketplaces.
An elaborate scam
The indictment said that some fraudulent devices were real Cisco products that were “typically older, lower-model, or less expensive Cisco products, some of which had been sold or discarded, but were modified to appear newer or like a higher-grade model. Tactics included pirated software and modding the hardware with “unauthorized, low-quality, and unreliable components,” including ones meant to circumnavigate methods for checking for software license compliance in order to authenticate the device.
The scam also involved making fake serial numbers that were often previously used Cisco serial numbers.
According to the indictment, Aksoy’s operation pushed these hacked devices for 60 to 88 per cent off the real products’ MSRP.
Efforts to stop Aksoy included US Customs and Border Protection seizing about 180 shipments of devices shipped to the operation from China and Hong Kong. Aksoy responded with false paperwork under the name Dave Durden, and his suppliers “broke the shipments up into smaller parcels and shipped them on different days,” the DOJ’s announcement said. It added that “Aksoy often continued to order counterfeit Cisco products from the same supplier” after the CBP’s seizure and notice.
Cisco also reportedly sent seven cease-and-desist letters to Aksoy from 2014 to 2019.
Officials raided Aksoy’s warehouse in 2021 and confiscated 1,156 counterfeit Cisco devices with a retail value of more than $7 million, per the DOJ.
In a statement, Vikas Khanna, attorney for the US District of New Jersey, said Aksoy had “one of the largest counterfeit-trafficking operations ever.”
