Sentenced to 140 hours community service and ordered to pay £750 in costs, the 22 year-old has become the first in the UK to face legal action.
The Cambridge graduate was found guilty of chipping the Xbox consoles, fitting a large 200GB hard drive which he then filled with 80 games that the chipped Xbox could play. The felon then proceeded to sell the consoles via his website for £380 (around US$670).
The man was caught by a member of the Entertainment & Leisure Software Publishers Association (ELSPA), an organisation set up to fight this form of crime.
Mr Rawlinson, deputy director general commented, "it sends a clear message to anyone tempted to become involved in chipping consoles that this is a criminal offence and will be dealt with accordingly."
"This case sets a major precedent which marks a milestone in the fight against piracy," he added.
This first arrest comes a year after Sony won a legal battle to prevent the sale of mod-chips in the UK, on the 22nd of July 2004.