I thought this made for an interesting read. The frontpage did a write up about it, but here is their source:
A San Diego-area man has been arrested and charged with 10 felonies relating to selling pirated games and modding consoles. Frederick Brown was taken into custody earlier this month after his home was raided by the San Diego Computer and Technology Crime High-Tech Response Unit (CATCH) and has since been freed after posting bail in the amount of $100,000.
In his home, Brown had over a thousand copies of pirated games as well as a large number of mod chips. Brown had allegedly built up a thriving business selling counterfeit games and installing mod chips, having advertised his services on Craigslist and other web sites. He allegedly sold pirated games from his Vista, CA, residence as well, including both discs and hard drives preloaded with games that he would install into customers' Xboxes and Xbox 360s,Entertainment Software Association senior VP for intellectual property enforcement Ric Hirsch told Ars Technica.
"Some of our member companies had seen his listings on Craigslist," Hirsch said. "We started to make some inquiries on our own last year and eventually through our investigations accumulated enough evidence to bring it to the attention of the CATCH team."
Hirsch explained that the ESA chose to pursue a criminal case instead of suing Brown in civil court because of the scope of his activities. "CATCH was very receptive to the evidence we brought them and were able to put the investigation together in very short order," Hirsch told Ars.
In the US, the DMCA bars the use of technological measures to bypass copy protection, and mod chips fall in to that category. Console manufacturers have taken an extremely dim view of mod chips, with Microsoft recently seeking out and kicking modded Xboxes off of Xbox Live. Last fall, a French company called Divineo that sold mod chips for the major consoles was hit with a $9 million judgment after being sued by Sony and the ESA.
Despite the hate from the ESA and console manufacturers, many gamers are big fans of mod chips, but not because of the piracy angle. Mod chips also allow gamers to play out-of-region games and homebrew software that unmodded consoles cannot play. With all of the pressure on the mod chip community, s are increasingly turning to softmods, which take advantage of holes in software to unlock systems.