Many of the nation’s cell phone providers are facing issues with handset arbitrage. These schemes exist across the country and involve groups of “runners” who purchase prepaid mobile phones from major retail outlets. The phones are then passed to middlemen who modify or remove the prepaid software and resell the altered phones as “new” at a significant profit to innocent customers domestically and abroad in Latin America, Asia and the Middle East. 

Some traffickers make use of dozens of e full-time "runners" to buy the phones at retail stores so they can later be hacked into and resold. The dilemma for the phone companies is that they regularly sell the phones at a loss, planning to make their profit when customers buy airtime from them in order to use the phones. The phone companies protect their investment in the phones by locking them to their service, and preventing them from being used on any other provider’s network. When the phones are hacked and shipped to a foreign country, the companies lose their opportunity to recoup their investment because no airtime is ever purchased.

Stumar has investigated these types of cases nationwide, assisting counsel to obtain large monetary awards and also gaining court orders prohibiting defendants from continuing to engage in the bulk purchase, sale, or unlocking/reflashing of prepaid wireless phones. Stumar has also assisted law enforcement in their efforts to stem this type of crime. For example, recently in Sugar Land, Texas, a repeat offender of arbitrage pleaded guilty in U.S. District Court to charges of criminally disobeying a federal court order prohibiting him from purchasing, tampering with or exporting prepaid mobile phones. The judge sentenced the defendant to nearly five years in federal prison. Stumar remains involved in many similar cases across the country, and is continuing to work with service providers and law enforcement to shut down this illegal activity.