Two California men arrested in scheme targeting gift cards sold in Michigan supermarkets
Two people who live in California have been charged in connection with a scheme to empty out gift cards sold at Metro Detroit Meijer supermarket stores, Michigan Attorney General Dana Nessel reported.
Guangji Zhang, 46, who lives in Irvine, and Huachao Sun, 35, who lives in Los Angeles, were both arraigned in the 51st District Court in Waterford before Judge Richard Kuhn on March 7, according to a press release issued Friday.
Around 3,000 gift cards were found as officers investigated the scheme, the press release said.
Nessel has since released a video alerting consumers to the gift card scam, detailing how the scam is believed to operate, and offering tips to avoid becoming a victim.
"We have reason to believe they weren't the only two pulling this off," she said about the current investigation.
Gift cards for a variety of retailers and restaurants are widely available at a kiosk or display in stores. The customer picks out a card, takes it to the register, and the purchase money is credited to the account on the card. Yet at that point, a fraud may already be in progress, Nessel explained.
To use the money deposited on a gift card, the customer takes it to the designated retailer to scratch off or read the redemption number. In this scheme, the money is stolen before the customer has a chance to do so.
Nessel said in the video there is a scheme involving the theft of empty, unsold gift cards. The cards are tampered with so that the redemption numbers are read and recorded by scanners. The numbers are then concealed again to appear as the cards are brand new.
"It is alleged that the scammers then return the altered gift cards to their original intended retail point of sale and use computer programs to monitor when any card is activated with a balance of funds. As soon as a shopper places a balance on the card, the scammer is able to transfer the balance into another digital account," the press release said.
For all practical purposes, the money in the account is gone before the intended user can access it.
This investigation was sparked by a special agent of the United States Postal Inspection Service, which is a federal partner of the Attorney General's FORCE Team (which stands for Focused Organized Retail Crime Enforcement). A package determined to be suspicious by the USPIS agent was found to contain more than 1,500 gift cards and was addressed to the two individuals at a hotel in Dearborn.
The FORCE Team, working with detectives from the Michigan State Police Fraud East team, surveilled the package recipients who, allegedly, visited Meijer locations in White Lake, Waterford, Auburn Hills, Southgate, Allen Park and Taylor in southeast Michigan over two days, placing altered gift cards back among store stock.
Then on March 5, search warrants were executed on a vehicle and hotel room in which officers found more than 3,000 gift cards.
"Sophisticated fraud schemes undermine consumer trust and can cause significant financial harm, and I am proud of my FORCE Team for their efforts to shut down these operations and hold bad actors accountable," Nessel said.
The two men are each charged with one count of Conducting a Criminal Enterprise, a 20-year felony, and two counts of Possession of a Fraudulent or Altered Transaction Device. They both have probable cause conferences scheduled for March 18.
The FORCE Team is a first-in-the nation unit bringing together a team of attorney general staff, detectives and agents to investigate organized retail crime.
To avoid being the victim of such a scheme, Nessel recommended customers inspect gift cards carefully for any signs of tampering before purchasing the card or adding money to that account.
