Nope, Nobody Resells Tracfones for Money
DALLAS — People who buy prepaid cell phones in bulk to resell for profit are raising terrorism suspicions for law enforcement officials and causing big problems for wireless providers.
“Very simply, what’s going on here is you can buy a prepaid phone in Wal-Mart or Kmart for X and sell it across the border for Y, and Y is more than X,” said Joe Farren, director of public affairs for CTIA-The Wireless Association.
Ahhh, the age old practice of arbitrage. As for the terrorism angle, well not so good,
However, the FBI said it had no information to indicate the men had any direct connection to known terrorist groups and the men themselves told a magistrate they were simply buying the phones to resell them for a profit.
One man’s wife told The Associated Press that the men went to Michigan because so many people in the Dallas area were making the same types of purchases that they had to travel long distances to find the phones in stock.
Such profiteering hurts cell phone companies, said Roger Entner, an analyst for Ovum, a technology, research and consulting firm.
He said that such prepaid phones cost the companies that make them around $80 to $100. They then sell the phones for less — $20 to $70 — in hopes that customers will continue to load more minutes onto the phone, making the company money.
“The reason they subsidize the handset is to make it easier for people to buy the phones,” said Entner, who added that such phones are oftentimes bought by people who don’t have a lot of money. “They want you to get the phone and then use it.”
But there are those who buy the phones in bulk, strip out the software and load them with software that will work in other countries, most likely Latin America because the systems are similar, he said.
FBI spokesman Stephen Kodak said that the only issue with such enterprises is where the profits from the resale are going, whether profits are being used to generate money for terrorism.
“We haven’t seen any nexus at this time,” Kodak said.
A Dallas Police Department spokeswoman said that they have been alerted by clerks from time to time because of large prepaid cell purchases, but there is nothing illegal about that in itself.
And yes, non-Middle Easterners do this too,
The focus on people buying cell phones in bulk concerns 26-year-old New Yorker Michael Vargas, who said he buys and resells the phones.
Vargas, who contacted The Associated Press, said the widespread trade in TracFones is legal, adding that he had been questioned multiple times by police during his buying trips but always let go.
Basically, what we have is arbitrage going on and that isn’t illegal. Buying a Tracfone stripping out the software and installing new software making the phones able to function overseas or seperating them from their providers might be, but the simple act of buying and then reselling is not illegal. To be sure these phones have their uses for those engaged in illegal activities such as drug smuggling and smuggling illegal immigrants into the U.S. Also, there is the potential that a terrorist organization could use reselling as a means of generating money for their terrorist activities. So, as I’ve noted before, following up on these kinds of things is sensible. However, calling people who do this kind of thing terrorists right off the bat is premature.