Retirees in the US are being scammed with Walmart gift cards: how the scheme works

Walmart has identified and frozen nearly $4 million worth of gift cards purchased by thousands of predominantly elderly victims due to fraudulent deception, according to court records and the company, reports CNBC.

Photo: Shutterstock

The US Department of Justice, having been notified by Walmart, recently seized the money through a federal court in Arkansas. Now victims of scammers can demand money.

"What they were able to do was impressive," a Justice Department official said of Walmart's actions.

Forfeiture of funds from fraudulent gift cards is good news for older Americans and others who have lost money in these schemes if they find out they can claim their money back.

But the money Walmart has saved for these victims is only a fraction of the millions of dollars lost each year in so-called impostor scams based on gift card purchases.

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

According to the Federal Trade Commission, in the first nine months of 2021, consumers reported $148 million in fraud losses when gift cards were used to pay by scammers.

On the subject: Hundreds of Walmart Stores Sell Parasite-Infested Lettuce Now Recalled

In comparison, according to the FTC, $2020 million was lost to gift card fraud in all of 114.

How gift card scams work

Gift card scams typically involve callers, often from overseas, phoning victims and telling them they owe money in debt or necessary services and that they should immediately go to a store to purchase a gift card that can be purchased. be used to settle the estimated liability.

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

"They create a false sense of urgency," a Justice Department spokesman said.

“You have to solve this now, otherwise something terrible will happen,” the official said, citing an example of how scammers put pressure on their victims. “It’s a very vulnerable position, and it’s very effective.”

A common ploy is to claim that the deceiver is a federal entity such as the IRS.

“Government agencies are scary,” the official said.

The official said people should "breathe" when they receive such calls. I hope this gives you time to think,” rather than rushing to satisfy the caller's demand for payment.

Andy Mao, Senior Litigation Initiative Coordinator for the Department of Justice, noted that "Federal agencies like the Social Security Administration, the Internal Revenue Service, or the FBI will never ask for payment with a gift card."

“Therefore, if someone makes such a request, you should hang up or end the conversation immediately and report it to the FBI Internet Crime Complaint Center,” Mao said.

The FTC notes on its gift card scam website, "Someone might ask you to pay for something by putting money on a gift card, like a Google Play or iTunes card."

“If they ask you to do this, they are trying to deceive you,” the FTC says. - No real business or government agency will ever insist that you pay them with a gift card. Anyone who asks for payment with a gift card is a scammer.”

But data shows that about half of the victims who report this kind of scam end up making a payment with a gift card.

In 2021, gift cards were the most common payment method for fraud victims over the age of 60.

Once the cards are purchased, the scammers ask their victims to scrape off the back of the cards to reveal the identification number. It can be used online or in a store to buy items that can then be sold for profit.

And when cards are used, cash disappears. It becomes difficult, if not impossible, for victims to recover their losses.

While losses from gift card scams are on the rise, retailers like Walmart, Target, Walgreens, CVS, and others are still relatively infrequent in stopping the scam, much less freezing fraudulent gift cards so victims can get a refund. . The data shows that these big retailers are the most common places where scammers trick their victims into buying gift cards.

"What happened in the Arkansas Walmart case is great, but it's the exception, not the rule," a Justice Department spokesman said.

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

"It's hard to get the money back," he said.

The official urged people who believe they have been scammed to contact the Victim Witness Program through the Department of Justice website - https://www.justice.gov/uspc/victim-witness-program — to report a crime and possibly recoup their losses.

Walmart says its victimized fraud program is unique among retailers. These efforts have resulted in a halt to some of the fraud and a freeze on fraud-related gift cards.

"Walmart has implemented a multi-pronged strategy to better protect consumers from the growing problem of gift card fraud involving victims in retail," said Walmart spokesman Randy Hargrove.

“This includes developing our own proprietary program designed to detect clear fraud and freeze funds whenever possible before they can be used if gift card fraud is suspected,” Hargrove said.

Walmart said it has developed technology to detect fraud-related gift card purchases and has increased signage in its stores and online to educate consumers about common signs of fraud.

And Walmart is participating in public and private retail programs to share its technology with other retailers to help them solve the problem of fraudulent gift card purchases in their own stores.

How did you get $4 million back?

The development of this Walmart strategy and how it works is discussed in detail in an affidavit from a U.S. Secret Service agent. The case was filed in Arkansas federal court as part of a recent lawsuit to forfeit gift cards.

The sworn statement was publicly noted on the Twitter account of Seamus Hughes, associate director of the Extremism Program at The George Washington University in Washington, DC.

The affidavit states that in the fall of 2015, Walmart's global investigation team "noted a pattern of regular inquiries from local police departments regarding reports filed by fraud victims" who were asked to purchase Walmart gift cards, typically worth $500. and $1000.

In response, this team uncovered CCTV footage at Walmart stores showing people putting money into gift cards that were the subject of police reports.

The retailer found that "a disproportionate number of victims at checkouts who loaded Walmart gift cards were elderly," a U.S. Secret Service agent wrote in an affidavit. Surveillance also showed that the victims routinely "actively used their cell phones to give Walmart gift card numbers to an unknown person" on the other end of the line, the sworn statement said.

The document shows that Walmart, in the course of reviewing its gift card system, discovered a pattern in which a large number of gift cards were purchased in the United States and their value was immediately verified overseas. The retailer also found that these gift cards were being used to make purchases—within hours or minutes of card denomination being loaded—in locations other than where the card was loaded.

Walmart began tracking the balance of gift cards from overseas in February 2016 and developed a system to detect what the retailer believed were card scams, the sworn statement said.

In the end, Walmart identified about 10 suspicious transactions worth $600 million. In July 4,4, the retailer froze gift card funds linked to the alleged fraud and contacted the Secret Service about the money, the sworn statement said.

Casualties

The paper also shows how such scams have continued and gives examples of the methods the scammers have used to deceive their victims.

One man, a 64-year-old truck driver from Belleville, Michigan, identified by the initials R.J, told the Secret Service that in September 2020, a man with a "Middle Eastern accent" called him on his cell phone "and claimed to be a bill collector from apartment complex in Michigan where R.J. previously lived." The caller claimed that R.J. owed $4000 but could pay off the balance by buying two Walmart gift cards for $500 each.

R.J. bought the cards while driving through North Little Rock, Arkansas, and, “as instructed,” quickly called the person who demanded payment “and provided the caller with Walmart gift card numbers,” the sworn letter says.

R.J. told a Secret Service agent that he "did not realize he was a victim of fraud until the caller contacted him on the phone about a week later and made the same demands," the agent wrote in an affidavit. R.J. refused a second time and never heard the caller again.

RJ's loss of $1000 and about $500 to others in similar scams is typical of older victims of gift card fraud. Other victims ended up losing much more.

One victim named in the affidavit, a 70-year-old man identified as K.K., was scammed out of $8000 worth of Walmart gift cards in a scam spanning 21 months. K.K. told investigators that the scammer called to propose to K.K. protection from being "hacked" into his various online accounts, and then, much later, claimed he was an FBI agent "trying to bust the bad guys." In addition to the gift cards, KK claimed that the scammer scammed him of almost $130 more, the affidavit says.

Individual scammers can earn significant amounts from gift card scams alone.

A Department of Justice official said in one case the department is investigating, scammers kept one victim on a phone line for 11 hours, "and that person ended up buying more than $35 worth of gift cards."

In this case, according to the official, "the bad guys told the victim that his social security number had been compromised and there was a warrant for their arrest."

In November 2019, investigators from Walmart Global Investigations and the Secret Service identified one individual, a Chinese citizen living in New Hampshire named Sungari Liu, who made over $16 in gift card transactions in Arkansas that month alone.

Liu's criminal affidavit states that investigators believed the Chinese national was making between $500 and $000 million a month from gift card fraud.

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

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In January, police in Colleyville, Texas, announced that they had arrested two more people who were allegedly part of what they called the "Asian Money Laundering Network" whose proceeds are being sent to China.

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