Pallets of cell phones were found at Idaho family’s homes. Feds set to argue conspiracy

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Jury selection is scheduled to begin Monday in a Boise federal court surrounding accusations of an expansive, multimillion-dollar conspiracy to sell counterfeit Apple and Samsung cell phones and accessories.

In August 2018, a federal grand jury indicted 10 people — Pavel, Gennady, Piotr, Timofey, Kristina and Natalya Babichenko, as well as David Bibikov, Anna Iyerusalimets, Mikhail Iyerusalimets and Artur Pupko — on dozens of counts of wire fraud, mail fraud, money laundering and trafficking in counterfeit goods. Prosecutors accused the group of a criminal conspiracy dating as far back as 2008.

Once a jury is selected, a trial could take weeks or even months, as eight to 10 weeks has been set aside for the trial. The trial will take place at the James A. McClure Federal Building and Courthouse in Boise.

Charging documents accused the group of smuggling counterfeit phones in bulk from Hong Kong and China to Idaho, as Pavel, Piotr and Timofey Babichenko allegedly went from Idaho to Asia to obtain the supplies before smuggling items into the country. The group then allegedly repackaged the products before selling the counterfeits on websites like Amazon and eBay while labeling the products as “new” and “authentic.”

Court records show that federal authorities from the FBI and Department of Homeland Security bought over a dozen counterfeit devices from the Babichenkos from November 2015 to December 2017.

In addition to those purchases, court records say that a confidential informant made “bulk” purchases from Pavel Babichenko and David Bibikov at two Boise warehouses. The confidential informant told the two he was going to resell the devices through Amazon and eBay.

FBI and Homeland Security agents raided multiple properties owned by the Babichenkos on the morning of Aug. 22, 2018. Previous Idaho Statesman reporting shows that agents went to two homes in Eagle, one owned by Pavel Babichenko and another owned by Gennady Babichenko. At the time, the homes were valued at over $800,000 each.

Another raid took place at a Boise warehouse, located just west of the West Family YMCA and Boise City Aquatic Center. According to a superseding indictment filed on May 15, 2019, investigators found 60 pallets of contraband consisting of “cell phones, packaging and other related items.”

Nearly $2 million, Boise-area properties seized

The superseding indictment says federal authorities seized a large amount of money and property from the Babichenkos, including over $50,000 in cash and several vehicles that agents believed were purchased with money made from the illegal activity. Agents also seized numerous gold and silver coins, diamond rings and a Rolex watch.

Federal agents seized dozens of bank accounts from the 10 indicted, totaling nearly $2 million, with some accounts containing hundreds of thousands of dollars. Despite seizing bank accounts, federal agents said in 2018 court filings that at least $10 million in property was transferred, used or otherwise could not be recovered.

Authorities seized several pieces of real estate that could be forfeited to the government, including homes in Boise and Meridian, a Boise church and a business in Caldwell. The Babichenkos also reportedly owned several properties in Brazil that were seized, which law enforcement said created a flight risk for those charged.

If those who own the properties, items or money are found guilty, federal authorities would take control of those assets.

The trial was initially slated to start in October 2018, but it has been delayed several times. Attorneys in court filings have noted the complexity of the case as a reason for delaying the trial.

Family faced previous cell phone issues

Prior to the investigation that led to the 2018 indictments, Pavel Babichenko and others in the Babichenko family were sued by cell phone companies Virgin Mobile and TracFone Wireless in 2006 and 2009, respectively.

Virgin Mobile accused the defendants of unlawfully buying and reselling their products, but the case was later settled. The defendants in the case had to agree they would never buy, hack, repackage or distribute any Virgin Mobile phones.

In the TracFone lawsuit, the company accused the Babichenkos of “unlawful business practices involving the unauthorized and unlawful computer unlocking or reflashing of TracFone/NET10 prepaid phones.” That case was settled a year later through arbitration, though the terms of the settlement were not outlined in court records.

More recently, Pupko pleaded guilty in September 2019 to three counts of trafficking in counterfeit goods. A judge ordered him to pay $9.5 million in restitution to Apple and Samsung for his role in producing the counterfeit phones.

Though Pupko pleaded guilty nearly two years ago to charges, he has yet to be sentenced in court as of Wednesday.

For the remaining defendants in the case, they could face up to 20 years in prison and a $250,000 fine on the money laundering, wire fraud and mail fraud counts; and up to 10 years in prison and a $5 million fine on counterfeit trademark goods trafficking counts.