7 On Your Side: Scammers still finding ways profit on stolen phones

Berkeley, Calif. (KGO) -- It's been over two years since wireless carriers began blocking service on stolen smartphones. The goal is to deter phone thefts. But one consumer found out the system is not foolproof.

Scammers are still finding ways to make a profit on stolen phones.

Michael Edwards can listen to music on his new iPhone 6 and even take pictures. Other than that, the phone is pretty much useless

AT&T just cut off his service even though he paid his bills.

"I can't text and I can't make phone calls, the two most basic things a phone should be able to do," said Edwards.

The reason? AT&T told him that his phone has been stolen. His shiny new iPhone just showed up on the national database of stolen phones. So AT&T had to cut off service.

It's part of a national effort to stop scammers from stealing phones and reselling them.

"Instead of the person that committed the crime getting in trouble, I get all the consequences," he said.

Edwards thought he'd done everything right, although he did buy the phone from a seller on Craigslist. But first, he did make sure it wasn't stolen.

Edwards and the seller met at an AT&T store in El Cerrito. She handed him the phone, still sealed in its original box. The store manager checked to see if it was listed in the stolen-phone database. It was not.

"The manager ran the information on the phone, the electronic serial number," explained Edwards.

Edwards paid the seller $580 cash in the store, AT&T turned on service and Edwards used the phone for two months until it was blacklisted.

Edwards says police wouldn't take a report and no one wanted the phone. "Apple won't take it back, AT&T doesn't want it."

So, he contacted 7 On Your Side. "I know 7 On Your Side can help people who are victims of this kind of fraud," said Edwards.

7 On Your Side contacted AT&T and found out the phone was not reported stolen until two months after he bought it.

AT&T launched an investigation into this case.

They told & On Your Side, "We are working with the customer to help him resolve his issue and we are looking into this matter."

AT&T would not publicly disclose how it plans to resolve this problem for Edwards, or whether or not it will provide a new phone or turn on his service. AT&T says disclosures could impede its ongoing investigation.

Seven On Your Side follow up to find out how a thief pulled off this scam.