Walmart has saved millions from big gift card scams

A gift card display at the Walmart Inc. store in Barbank, California.

Patrick T. Fallon | Bloomberg | Getty Images

The technology created by Walmart has helped the retail giant identify and deposit around $ 4 million in gift cards that were initially bought by thousands of adults who cheated on them, according to court records and the company.

The U.S. Department of Justice, after being informed by Walmart, recently seized that money through a federal court action in Arkansas. Now the victims of fraud can claim money.

“What they were able to do was impressive,” a DOJ official said of Walmart’s move. The official spoke to CNBC on condition of anonymity.

Good news for older Americans and others who have lost money on these fraudulent gift card funds – if they are aware they can claim their fraudulent money.

But the money Walmart saved for those victims is a tiny fraction of the billions of dollars lost annually in so-called fraud scams that rely on gift card purchases.

And the amount of money received through such schemes has increased in recent years.

According to the Federal Trade Commission, in the first nine months of 2021, consumers reported a loss of $ 148 million in fraudulent use of gift cards to pay scammers.

By comparison, gift card fraud in 2020 alone was reported to have lost $ 114 million, the FTC says.

How gift card scams work

Gift card scams involve regular callers, often coming from abroad, phoning victims and telling them that they owe money for a loan or essential services, and they must immediately go to a retail location to buy a gift card that can be used to pay off the said money. . Obligation

The caller claims to be a representative of a government agency, utility, or private company that insists on immediate payment.

“They create this false sense of urgency,” the DOJ official said.

“You have to fix it now, or something terrible is going to happen,” the official said, citing an example of how scammers hit their targets.

“Put it in a very weak position and it’s very effective.”

A common strategy is to claim to be a federal entity, such as the IRS.

“Government agencies are scary,” the official said

The official said that when people receive such calls, they should “take a breath. Hopefully, this will give you time to think about it,” and do not rush to meet the caller’s demand for payment.

Andy Mao, the DOJ’s senior Justice Initiative coordinator, noted that “federal agencies, such as the Social Security Administration, the Internal Revenue Service, or the FBI, will not request payment by gift card.”

“So if anyone makes that request, you should cut off communication immediately and report to the FBI’s Internet Crime Complaints Center,” Mao said.

Victims can file a complaint at IC3 at

The FTC mentions on its website about gift card scams: “Someone might ask you to put something in a gift card, such as a Google Play or iTunes card, and then give you something with the numbers on the back of the card.”

“If they tell you to do this, they’re trying to scam you,” the FTC said “No real business or government agency will ever force you to pay them with a gift card. Anyone who claims to pay with a gift card is a fraud.”

But about half of victims who report “fraudulent scams” pay using a gift card, the data shows.

In 2021, gift cards for fraud victims over the age of 60 will be the most reported method of payment.

Once the card is purchased, scammers reveal an ID number by scratching the back of their victim’s card. It can be used to buy items online or in stores which can then be sold for profit.

And when the card is used, the cash is gone. If it is not impossible for the victims to compensate them, it becomes difficult.

Even as losses from gift card scams increase, it remains relatively rare for retailers like Walmart, Target, Walgreens, CVS and others to keep victims from tearing up, much less refrigerated gift cards to compensate victims. Data shows that those large retailers are the most common place where fraudsters instruct their victims to buy gift cards.

“What happened in Arkansas is great [with Walmart]But this is the exception, not the rule, “said a DOJ official who spoke to CNBC on condition of anonymity.

“I suspect that a very small percentage of victims, especially in gift card scandals, get their money back,” the official said.

“It’s hard to get a refund,” the official said.

Officers who believe they have been deceived may contact the Victim Witness Program through a DOJ website – – to report the crime and, potentially, their Requested money for revenge

Walmart says its victim-assisted consumer fraud program is unique among retailers. Efforts to stop some of the scams and to fundraise gift cards linked to the scandal have been successful.

“Walmart has implemented a multifaceted strategy to better protect consumers against the growing problem of victim-aided gift card fraud in the retail industry,” said company spokesman Randy Hargrove.

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“This includes the development of our own proprietary, industry-leading technology designed to identify distinct red flags and to raise funds whenever possible before use if consumer gift card fraud is suspected,” Hargrove said.

Walmart says it has developed technology to detect gift card purchases linked to counterfeiting and has expanded its stores and online sign-ups to educate customers about common signs of scams.

And Walmart participates in public and private retail programs to share their technology with other retailers to help tackle the problem of fraudulent gift card purchases in their own location.

How to save $ 4M fraudulent gift cards

The development of that strategy by Walmart and how it works has been discussed at length in an affidavit by a U.S. Secret Service agent. It was filed in federal court in Arkansas as part of a recent gift card confiscation move.

The affidavit was leaked via the Twitter account of Seamus Hughes, deputy director of the Extremism Program at George Washington University in Washington, DC. .

The affidavit states that in the fall of 2015, Walmart’s global investigation team “noticed a pattern of regular inquiries from the local police department about reports filed by victims of unspecified scandals” who were instructed to purchase Walmart gift cards, typically between 500 and $ 1,000.

In response, the team identified video surveillance at Walmart stores that contained images of people loaded with cash on gift cards, the contents of a police report.

A U.S. Secret Service agent wrote in the affidavit that the retailer found that “Walmart gift card loaded cash registers have an unequal number of victims of senior citizens.”

Surveillance also showed that victims on the other end of the call typically “actively used their cellular phones to deliver Walmart gift card numbers to strangers”, the affidavit said.

The document reveals that Walmart, through a review of its gift card system, saw a pattern where a large number of gift cards were purchased in the vicinity of the United States and their quality was immediately tested from overseas locations.

Retailers have also noticed that those gift cards used to make purchases – within hours or minutes of the card being loaded – differ from the state in which the card was loaded.

Walmart began checking the balance of gift cards from abroad in February 2016 and developed a system to identify what the retailers believed to be fraudulent patterns associated with the cards, the affidavit said.

Finally, Walmart identified about 10,600 suspicious transactions valued at $ 4.4 million. In July 2017, the retailer froze gift card funds linked to suspected fraud and contacted the Secret Service about the money, the affidavit said.

The victim

The document further reveals how this type of fraud continues, giving examples of the methods that artists use to deceive their victims.

In Belleville, Mitch’s 64-year-old truck driver, identified by the initials “RJ”, told the Secret Service that in September 2020, a man with “a Middle Eastern accent” called on his cell phone and claimed to be a bill collector in an apartment complex in Michigan. RJ used to live there. “

The caller claims that RJ owes 4,000, but can pay the balance by buying two Walmart gift cards for $ 500 each.

The affidavit states that North Little Rock bought RJ cards while passing through the arc and “promptly called the person who demanded payment” and provided the caller with a Walmart gift card number, “the affidavit said.

RJ told the Secret Service agent that he “did not realize he had been cheated until Caller contacted him by telephone about a week later and made the same claim,” the agent wrote in the affidavit.

“RJ refused a second time and never heard from the caller again.”

RJ’s ক্ষতি 1,000 financial loss, and $ 500 or more by others in similar frauds, is common to older victims of gift card scams. The other victims lose a lot in the end.

One of the victims, identified as 70-year-old KK, quoted in the affidavit, was cheated of Walmart gift cards worth only $ 8,000 in a 21-month scam.

KK told investigators that a fraudster called KK to protect him from “hacking” his various online accounts, and later claimed to be an FBI agent “trying to destroy the bad guys.”

In addition to the gift cards, KK claimed that more than $ 130,000 had been defrauded by the scammer, the affidavit said.

Personal scammers can only make significant money from gift-card-related fraud.

A DOJ official who spoke to CNBC in the background said that in one case investigated by the department, the scammers kept a victim on the phone line for 11 hours, “and that person made more than $ 35,000 in gift cards.”

In that case, the official said, “the miscreants told the victim that her social security number had been compromised and that there was a warrant for their arrest.”

In November 2019, Walmart Global Investigation and Secret Service investigators identified one, a Chinese citizen living in New Hampshire named Songhua Liu, who completed more than $ 16,000 in gift card transactions in Arkansas that month alone, according to Democrats. Gazette newspapers and other Arkansas media outlets.

An affidavit from Liu’s criminal case states that investigators believe that Chinese citizens forged উপ 500,000 to $ 1 million in fraudulent gift cards each month, according to the report.

Liu was later sentenced to 27 months in federal prison after being convicted of wire fraud, with the expectation that he would be deported at the end of his term, records show.

In January, police in Colville, Texas, announced that they had arrested two more people who were part of the so-called “Asian Money Laundering Ring”, a victim of fraud involving many elderly people, involving more than 3 million. Gift cards, being sent to China with income.

Police say Walmart, working with global investigations, Texas law enforcement and the Secret Service, identified the fraud, which led to those involved “through a complex story about how they paid for the Norton antivirus scan.”

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