As used-phone market booms, so do thefts

Anyone with a used phone to sell — their own or someone else's — can walk into a mall in the metro area and get cash for it from a machine, which alarms authorities confronting a rash of phone thefts downtown and near the University of Minnesota campus.

A convenience for the legions of adults who upgrade their phones each year, the ecoATM kiosks are just one of the latest places to sell a used phone, including Best Buy stores, online marketplaces such as Craigslist, eBay and Swappa.com, and numerous pawnshops and phone stores.

University Police Chief Greg Hestness warned a state Senate panel this week that the practice of stealing iPhones — known as "Apple picking" — has thieves coming to the U campus to find students to rob, often by flashing a gun.

"It's been a huge problem here on campus recently," said Mike Schmit, the student body president. "Just about everybody's got their smartphone, plus most of us have a laptop."

On Wednesday, an armed robber confronted a woman near 6th Street and 14th Avenue SE. at 9:20 a.m. as she walked to class, ripping away her backpack and taking her wallet, smartphone and iPad. It was the 29th reported robbery on or near the Minneapolis campus since Aug. 1.

Even an older model smartphone can be worth hundreds of dollars on the resale market, and they're everywhere: A majority of American adults now carry a smartphone, according to a Pew Research Center study released this summer.

With the average user holding on to their phone for less than two years before upgrading, a booming used-phone business worth billions of dollars in the United States alone has people such as Austin White-Pentony hoping to cash in.

TechBank: expanding

The owner of a mall kiosk that buys used phones, White-Pentony and two friends opened TechBank just a few months ago. Their only location, for now, is on the upper level of Rosedale Mall in Roseville, where they buy several used phones a day.

Almost from the start, they've had to screen out thieves and stolen phones from their legitimate customers. Their second customer sold them a phone that just days later was reported stolen, said co-owner Aklilu Dimore. He turned it in to the Roseville Police Department, losing money in the process.

To prevent more losses like that one, the company checks each phone's Mobile Equipment Identifier, or MEID number, which is displayed in the phone's settings.

They run that number against a database maintained by the phone carriers of phones that have been reported lost or stolen.

If they find that the phone has been lost or stolen, they have a signal to alert mall security.

Even then, thieves can run. A woman who was trying to sell TechBank a phone that showed up on the carrier's list of stolen phones ran off as a mall security guard approached, screaming that her phone wasn't stolen. She escaped the guard, who managed to get a photograph of the woman's license plate as she drove out of the mall's parking lot. The photo was turned over to authorities.

TechBank will expand soon, said White-Pentony, who added that the used-phone market needs legitimate businesses like theirs.

Another kiosk: ecoATM

Among TechBank's biggest competitors is ecoATM, which operates hundreds of ATM-like kiosks nationwide, with 13 in Minnesota, including one on the lower level of Rosedale, just a stone's throw from TechBank.

The kiosk is something like an advanced vending machine, with a large bay on the front for accepting used technology. Billed as an electronics recycler, the machine's focus is on phones, although it also accepts MP3 players and tablets. The company is owned by Outerwall Inc. of Bellevue, Wash., which also owns the Redbox DVD rental business.

Alarmed that the kiosks are little more than an easy way for thieves to unload their stolen goods, a politician in Maryland wants to ban the machines from his state. The Baltimore City Council banned them from the city. And police in Daytona Beach, Fla.; Columbus, Ohio, and Washington, D.C., have met the arrival of the kiosks with concern.

A company spokesman said ecoATM's security measures make it difficult for thieves to fence stolen electronics through the machines. To sell a phone at an ecoATM kiosk, the seller must swipe a driver's license and supply a thumbprint. Video cameras record and photograph the transaction. And, the company said, an employee watches each transaction remotely to compare the picture on the ID to the person selling the phone.

If a phone turns out to be stolen, the thief's picture will have been recorded and supplied to the police.

"We can provide [the police] with multiple photographs of the person who sold us the device," said company spokesman Ryan Kuder.

The company acknowledges that despite these precautions, some stolen phones get through its screening but said it's less than 1 percent. A study by the Columbus (Ohio) Police Department of 1,000 transactions at four ecoATMS in that city determined that 9 percent of the transactions involved stolen phones — a figure ecoATM representatives disputed.

Since arriving in Minnesota in April, the company has recycled 10,000 devices, said Kuder, with "a dozenish" phones being returned to the Minneapolis Police Department after the police asked for the phone.

The company expects strong growth, with estimates of 300 million to 500 million old phones lying around in the United States. The phone-recycling rate is somewhere around 11 percent, said Kuder, which despite being low is still better than it was a few years ago. The company recycled its millionth device in April.

Fly-by-nighters

The real culprits in fencing stolen phones, say both the ecoATM spokesman and the guys at TechBank, are fly-by-night operators who post on Craigslist or work on the street, promising to fix phones that have been reported stolen so that they disappear from the stolen phone lists maintained by phone carriers. That's called cleaning a phone's electronic serial number, or ESN.

A man in Brooklyn Park advertised on Craigslist this week saying he could clean a phone's ESN. E-mails sent by the Star Tribune to his listing did not receive a response.

"Even nail salons and food trucks will buy phones," said Kuder, the ecoATM spokesman.

Some of those phones end up overseas in China or South America, where a used iPhone can sell for hundreds of dollars more than in the United States, where phone prices are artificially low because they're subsidized by the phone carriers.

Schmit, the U student body president, said he recently bought the latest iPhone. He said that he still has two earlier models of the iPhone lying in a drawer in his room and that he plans to sell them soon.

A friend will show him how to do it on Craigslist, he said.

Matt McKinney • 612-217-1747