According to this article over at C|Net, Microsoft has apparently shut down Lik Sang, one of the world's largest distributors of Xbox mod chips. Not only was Lik Sang selling mod chips, they were also manufacturing them and selling pre-modded console systems, so it's unclear which particular infraction has them in hot water.
Mod chips are particularly damaging to Microsoft's business model for the Xbox because the company takes such a huge loss on the console itself. If consumers are able to use a mod chip to play pirated versions of Xbox games, there's no way for Microsoft to recover its costs.
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