Wolchek investigation: Smartphone jailbreaker sent to jail

A cellphone smuggling ring busted in Detroit and the judge sends the smuggler to prison.

Investigators say the phones were being sold to criminals all over the world. Most phone stores sell phones but these guys were buying them and paying big money, no questions asked.

Rob Wolchek broke the story and tracked down the guy behind this shady business, Jason Floarea. It turns out the feds were tracking him, too.

On Thursday the West Bloomfield man was back in court, and Wolchek was there.

"My attorney advised me not to speak to you at all, not make any comments at all, so just relax," he said.

Wolchek: "Well, I'm relaxed. They said you were the 'Godfather' of this crime, you don't buy that?"

Floarea: "Not true."

We'll hear more from Jason Floarea in a minute. First, some background.

Jason ran Ace Wholesale, a phone business in the suburbs of Detroit that was raided by the feds in 2012.

This is Homeland Security Special Agent Angela Potter.

"The investigation determined that Ace Wholesale and Jason Floarea were buying fraudulently obtained or stolen cell phones and shipping them overseas," Potter said.

Here's how it works: Bring in a cellphone, come out with some bucks. Sometimes more than the phone is even worth, at least here in America. 

Wolchek exposed a similar operation down the street from Jason Floarea's store in 2013.  Day after day we watched as a parade of people brought in cellphones and came out with cash.  

Floarea was shipping the cellphones he bought overseas where he sold them for outrageous prices.

How many cellphones?  In court they say Floarea sold 371,000 cellphones to Chinese dealers alone.

It's illegal and very lucrative.

"A lot of these phones are shipped overseas contrary to law are being used in terrorism and other criminal enterprises," Potter said.

Even after the bust, Floarea still seemed to be operating. That's when Wolchek came across him, driving a $150,000 Mercedes to his new store in Southfield.

In October, Floarea pleaded guilty to interstate transportation of stolen property. 

On Thursday  he was sentenced. The judge gave him 12 months and one day in federal prison. And he has to forfeit close to $1 million in cash that was confiscated in the raid.

On top of that, according to attorney Jim Baldinger, a judgement was entered against Floarea for $23 million in Sprint phones that Floarea sold on the black market.

"That $23 million does not come close to making Sprint whole," Baldinger said. "We've calculated the losses from just the phones, the Sprint phones, that Jason Floarea's company Ace Wholesale trafficked, and they exceed $85 million."

Floarea admitted in court he encouraged others to bring him phones for cash, no questions asked.

"There's a rash of violent crime that is spawned as a result of this conduct," Baldinger said. "Because people go out and commit armed robberies of cellphone stores, then use all sort of extreme means to get their hands on phones."

After court, Wolchek spoke to the man they call the 'Godfather' of the illegal cellphone racket.

Wolchek: "What do you think about the sentence? You got a pretty light sentence."

"I don't believe it's light," Floarea said. "It's hard to be away from your family at any time."

But Potter doesn't feel sorry for him. She says Floarea started an industry that's now spread nationwide.   

"He's a mastermind," she said. "He's very intelligent, a very intelligent guy."

"I have yet to come across another phone trafficker who didn't do business with Jason Floarea in some way or another," Baldinger said.

Hundreds of thousands of phones and tens of millions of dollars. Jason says he's now broke

Wolchek: "You still living in that big fancy house, driving a fancy car? "

"No car at all, actually car is gone," Floarea said. "Lots of things are gone, everything is gone. What else is there."

Floarea is out on bond until he reports to prison, to start serving his sentence.

Wolchek left a message for his attorney but he did not call back. 

The next time you look at your cellphone bill, consider this: Investigators claim illegal schemes like Floarea's cost customers up to $30 billion a year.
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