The Daily Item, Sunbury, PA

March 23, 2013

Police say machines that pay for used cellphones promote theft

By Cecilia Kang
The Washington Post

— WASHINGTON — Here's an easy way to get some cash: Drop a used smartphone in any of the 13 ATM-like kiosks at shopping malls around the Washington region and, within minutes, the machine will spit out as much as a few hundred dollars.

The process is so simple that local police fear these ecoATMs are fueling one of the nation's most pervasive criminal trends — cellphone theft.

The kiosks have become a particular thorn for police in Washington, where 40 percent of all forced robberies last year involved a cellphone, the highest percentage in the nation.

In a recent investigation, Washington police found six cellphones stolen from city residents in ecoATMs located in the suburbs. Police in Arlington, Va., say they are investigating whether stolen phones have made it into an ecoATM at a shopping mall near Washington. Authorities shut the machine down this month, citing a lack of a proper merchant license.

"This is a huge problem. The opportunity for quick cash is driving robberies of smartphones," said Gwendolyn Crump, a spokeswoman for Washington Police.

The stolen smartphone market is thriving largely due to an unregulated trade that spans the globe, authorities say. Used Apple devices are in strong demand overseas, where an iPhone 5 can sell for $500 or more. (It costs as little as $200 in the United States, because it is subsidized by cellular carriers.)

Sales of used smartphones are expected to reach $5 billion by 2015, according to Gazelle, a Boston firm that offers money for smartphones online. The company expects revenues of $100 million this year.

EcoATM and other similar firms say they are being unfairly blamed for phone thefts. The companies said they scan the unique IDs of the cellphones they acquire and check them against police databases that list stolen phones.

Matches are extremely rare, they say. But those databases aren't always comprehensive. So a report about a stolen phone in Washington won't necessarily be included in the database run by police in the Maryland and Virginia suburbs, said ecoATM, which operates about 340 kiosks across the country.

"We are disheartened by the focus on us because we are hoping to provide transparency on our reporting, and we want to help the D.C. police come up with solutions to catch thieves," said Ryan Kuder, ecoATM's director of marketing.

Smartphones have become the target of too many violent robberies, police say. In the summer of 2011, a Washington father was brutally beaten with a baseball bat for his iPhone and suffered permanent brain damage. Local police last year set up fencing operations that recovered nearly 500 stolen phones from stores and individual dealers. Law enforcement officials in Los Angeles and Atlanta have also singled out ecoATMs, saying the promises of "instant cash for phones" may be encouraging thieves.

An ecoATM can operate without a human being. The kiosk automatically scans a person's ID, snaps a picture of the customer and takes a fingerprint. It then automatically checks the unique phone ID against a local police database, which is updated regularly. If the ID isn't on the list, the machine instantly dispenses cash to the user.

There are no limits on the number of phones an individual can deposit. Washington Council member Tommy Wells, D, said police have seen individuals hand off phones to third parties who make the transactions at ecoATMs. In one police video, an elderly woman appeared to act as a middleman and deposited a stack of boxes of phones into a local ecoATM, Wells' staff said.

These individuals should raise suspicions, Wells said.

"Give me a break. EcoATM knows that anyone who wants to quickly trade in a new or hardly used iPhone 5 is suspect, but they do nothing about it," said Wells, who recently introduced a bill that would force used phone dealers to do more rigorous checks on their devices.

Washington authorities say they have worked hard in the past year to keep phone thefts from rising. But the proliferation of ecoATM has presented a fresh challenge, they say.

One solution has been to create a national database of stolen phones, an idea championed by Washington Police Chief Cathy Lanier. Wireless carriers would be banned from activating any phone that appeared on the list.

But the effort is only now getting going. And the database won't curb the growing international problem of stolen phones being reused abroad.

EcoATM says about 20 percent of the thousands of phones it collects each day are sold outside the United States, while Gazelle said half of its business comes from overseas buyers, particularly wholesalers in Hong Kong.

Gazelle wouldn't disclose its partners in Hong Kong but said firms there act as gateways to the global used-phone market that stretches from the Philippines to Brazil. In Brazil, consumers are willing to pay as much as $1,000 for a new iPhone 5, said Israel Ganot, president of Gazelle.

"In any emerging market you will see these stores everywhere that promote themselves as Apple stores and you'll also see hundreds of people crowded inside," Ganot said.