Mobile Karma, at one time the largest mobile phone recycler and reseller in the US, has shut down. The company bought phones from carriers, businesses and individuals, refurbished them and sold them online with a warranty.
The shut down came with little warning to customers. It was business as usual until Visitors to Mobile Karmas's site see this cryptic message:
At this time, MOBILE KARMA is unable to complete transactions.
If you need information or have questions regarding an order, product received
or other business, please send an email to Questions@MobileKarma.com
Although the message suggests the shutdown might be temporary, Mobile Karma's communication to its affiliate marketing partners doesn't hold out any hope:
Please accept this email as notice that Mobile Karma has ceased doing business. We have concluded all product transaction activity as of midnight on Friday, July 18, 2014. The business will officially be closing all business activities in the next few weeks. We are giving immediate notice to you and your business that all Mobile Karma contracts should be terminated effective July 17, 2014 and any remaining fees should be submitted for payment immediately to firstname.lastname@example.org. Please feel free to contact us should you have any questions.
Mobile Karma's future had been in doubt ever since its parent company ReCellular Inc. went into receivership and was acquired by eRecycling Corps in December. eRecycling Corps is a large wholesale electronics recycler which didn't have a retail sales business before acquiring Mobile Karma.
One can only speculate why eRecycling Corps shut down Mobile Karma so soon after buying it for a reported $2.9 million in cash. Maybe they just wanted Mobile Karma's recycling facility and inventory of phones and planned to shut it down all along. Or perhaps, like the original owners, they found that couldn't make a profit from the business.
The used phone business has never been easy but it seems to have gotten a lot tougher lately. There's always been a problem with unscrupulous individuals selling a phone and then when they have the money in hand reporting it lost or stolen to commit insurance fraud. Phones reported lost or stolen phones get blacklisted and blocked from activation by the carriers, leaving the purchaser stuck with a brick. Last year the US carriers started sharing their blacklists so it's no longer possible to activate a phone blocked on one operator on another one. Phones getting blocked post-sale leads to returns and refunds and hurt's a reseller's reputation
With iOS 7 Apple made a change to the way the Find My Phone feature works that are causing big problems for used phone buyers. When Find My Phone is enabled on an iPhone or iPad running iOS 7 or latter, the phone is iCloud Locked, meaning the user has to enter their Apple ID and password in order to reset, wipe, restore or re-activate the phone. Apple tells users that they need to reset their devices by choosing Erase All Content and Settings under Settings > General > Reset before selling them but many users are neglecting to do so. The result is that there are lots of iCloud Locked devices in the used phone marketplace. Some of these phones are stolen, but many are not. The iClould Lock hasn't been defeated and Apple reportedly won't remove the lock, even if you have a bill of sale from the original owner. If you get stuck with an iCloud Locked iPhone, contact the seller, the original owner can still remove the lock by logging into their online iCloud account and following the instructions in this Apple Knowledgebase article.
Permanently disabling a lost or stolen phone is a great idea. But Apple's implementation seems flawed. I would have expected that the owner would have to notify Apple that the phone was lost or stolen in order to lock it. Locking a phone simply because the original owner neglected reset it seems wrong.
In an effort to reduce smartphone thefts, Microsoft and Google have agreed to add a "Kill Switch" feature to Windows Phone and Android with their next major OS release. Hopefully their implementation will be a little more friendly to used phone buyers and sellers, than Apple's.