Many collectable figures are already heavy on fan service. For some, that's not enough as they are looking for something a bit more. That "more" is often "more explicit" as the customized figures show character fully nude or engaged in sexual activities. The figures are called "makaizou figures" (魔改造フィギュア) with "ma" (魔) meaning "demon" or something evil and "kaizou" (改造) meaning "customized" or "modded". So in English, "makaizou" might be called "demon modded".
Okay, so these are not mainstream figures. Most people in Japan would want nothing to do with them (ditto for regular figurines), but hey, there are customers willing to shell out big money. If you are skilled enough to mod them yourself, you can sell them online for a tidy sum.
In fact, about ten years ago, talented Japanese model builders started making names for themselves by selling their modded figures via online auctions. In the days before the internet, there were even manuals for hobbyists to build their own customized pieces. To this day, there's still very much a makaizou subculture in Japan, which is evident at figurine events across the country that allow modelers to show off and even sell their customized work.
The rub has been that Japanese authorities (and anime and manga companies, too) have been willing to overlook copyright violations at these otaku (geek) events, seeing them as a part of fandom. Since the figures have traditionally been available only at these events, and since the figures are usually one off pieces, they modelers can remain untouched by Johnny Law.
But the same internet that helped some of these model makers make a name for themselves in geek circles is now biting some of them in the ass. Back in early 2011, two model builders were arrested for selling a customized Kamen Rider figures for over US$3,000. They were pinned for violating Japanese copyright law.
Selling these figures online makes these figures appear less like they are some one-off fan creation, but rather, that they are a product created by a business.
Violating Japanese copyright law is exactly what's getting makaizou figure creators arrested, not making sexually explicit characters. However, it's probably true that anime and manga companies are more eager to strike if they see their characters violated in explicit manners.
The latest? Today, the Yomiuri Online is reporting that a Chiba Prefecture police arrested 33 year-old Yuuichi Inamura for allegedly violating Japanese copyright law. He is accused of selling three makaizou figures of One Piece character Nami via online auctions for ¥40,000 (US$500) without getting permission from One Piece's copyright holder.
It's not so much that the police with arrest you for selling sexy knock-offs over the internet. They'll arrest you for selling knock-offs. And with a conviction rate of 99.97 percent, the Japanese police are the king of the cuffs.