Counterfeit iPhones are a huge issue for Apple, and that’s definitely the case when one of its biggest supply partner gets entangled in a fraud ring.

Mirrormedia was the first to report the latest controversy (via TaiwanNews and AppleInsider). Foxconn is reportedly investigating claims that employees have been using faulty iPhone parts and selling iPhones with these parts installed. The parts were deemed defective to begin with, but the employees used them in the counterfeit iPhones.

According to the report, the fraud ring, which ran over three years, earned NT$1.3 billion ($43 million). A Taiwanese businessman is reportedly the mastermind behind the whole fraudulent stunt, but that person has not been named. That businessman was working with different management staff at the Zhengzhou factory.

The faulty parts in question were supposed to be destroyed. However, the faulty parts were then built into full iPhones. Due to the fact they were manufactured in a Foxconn factory, those devices were then sold as real Apple devices.

Tim Cook has been notified of the situation, and Foxconn has launched an internal audit.

The fact that this ring, which ran for a three-year period, earned $43 million is huge in its own right. Just as a quick comparison, a counterfeit iPhone and iPad repair scheme we reported about earlier this year cost Apple “just” $6 million.