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Fraud to me is when somebody has a 360, that is either out of warranty or they don't have a receipt. They then purchase a new 360 from somebody like Walmart and then put the old 360 into the box and return it.
In the case of the deal here above, while a bit questionable from an ethics perspective, it's a loophole in the deal that Best Buy should be looking for. But apparently they are not. In the end, i'm sure Best Buy will do just fine. It probably saves them on a bunch of taxes anyway with the lower profits...so in the end, it could be to their advantage.
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