Nationwide gift card scam linked to fentanyl and human trafficking, DHS says
NORTH TEXAS – Gift cards are bound to remain popular holiday presents, but anyone with them on their shopping list needs to be aware of a worldwide scam. The CBS News Texas I-Team found the latest fraud involving gift cards is on a global scale, and it includes Chinese gangs and hundreds of "mules" across the country.
"It's more massive than most people understand," said Capt. Jeff Roberts with the Texas Financial Crimes Intelligence Center, a statewide office that coordinates law enforcement investigations for organized financial crimes.
"The reality is, this is organized crime and at the high level, this is affecting every state in the continental U.S., and probably worldwide," Roberts said.
Chinese-backed organized crime gift card fraud
Even federal law enforcement is involved. Last year, Homeland Security Investigations created the Project Red Hook, a collaborative effort that teams up law enforcement with big box stores to focus on Chinese-backed gift card fraud.
"We have seen heavy involvement of Chinese organized crime into this space," said Adam Parks, the director of Project Red Hook. "I think they've seen this as an opportunity to get rich quick without a lot of consequences."
According to the DHS' website, the gift card fraud funds illicit gang activity like fentanyl production and smuggling, illegal immigration and human trafficking.
How the gift card scam works
Gangs hire people, known as "mules," to shoplift gift cards en masse from popular retailers. The mules send them to a location where the scammers open the cards, copy the information and repackage them, then send them back to the mules who place them back in stores.
"We've seen videos ... where there are literally factories or places where people are manufacturing and resealing to surgical precision," Roberts said.
When consumers pay for the compromised gift cards, the scammers then have access to the money. By the time the intended recipient goes to redeem the gift card, the funds are gone.
Thousands of stolen gift cards worth millions of dollars
In Burleson, just south of Fort Worth, police arrested two men this summer in what their department called a "sophisticated multi-state gift card tampering ring." The men are Chinese nationals who apparently entered the country illegally.
According to Det. Madison Marston, the men were caught leaving a Target store in Burleson with "packed pockets" full of shoplifted gift cards. During a traffic stop, officers found more than 1,000 cards inside the car.
Marston said the men were operating out of a hotel in Carrollton, just north of Dallas. When police searched the hotel room, they found another 4,000 cards with an estimated value of $1.7 million.
Investigators believe the men were shipping the cards to California, where they would be tampered with, resealed, and then put back on store shelves in DFW.
"You would never know which is a good gift card and which is a bad one," said Marston.
Filling racks with adulterated gift cards
Police in Pantego, near Arlington, had a similar case last fall at a CVS pharmacy on Park Row. An employee called the police after watching a man take gift cards from his pockets and put them on the racks.
When officers arrested the man, they found him with a backpack full of gift cards. A search of his vehicle turned up boxes with several thousand more.
"He was actually a college student," said Pantego Police Chief Robert Rife. "He just happened to get picked up for this job, making extra money, to put these gift cards on the shelves."
The 25-year-old man was from California. Rife said he told officers he was traveling across the U.S. in a rental car, switching out gift cards at stores.
"I believe he was down on the bottom of the organization that was conducting this theft ring," Rife said.
By filling the racks with dozens of adulterated cards, criminals increase the chances that customers won't notice signs of tampering. That's why authorities said shoppers need to carefully inspect every card before purchasing.
"The advice that I give is to treat gift cards like you do produce," said Parks, the Project Red Hook director. "You don't want to get the bruised apple, you want the best one. Red. Clean. Same with gift cards."
He also suggested using the card immediately, or transferring the money to a digital wallet if possible.
According to Parks, Project Red Hook has led to more than 150 arrests nationwide since it was established last year.
How to spot gift card tampering
According to Project Red Hook, these are the following red flag indicators of gift card tampering:
- Visibly evident tears in the zigzag cuts around the perimeter of the secure pack or visible paper fibers around the borders where a sharp knife may have cut through an edge.
- Visibly evident tears or exposed nicks along the pull tab or a pull tab that has been compromised or cut with a knife and then laid back down. A slight bend back and forth can show if this has occurred.
- Product and brand logos, colors, or marks closely resemble, but do not match a company's intellectual property.
- The personal identification number (PIN) cover has pieces missing, is fully missing, is not flat/smooth or contains wrinkles.
- The product's packaging or PIN covering deviates from the company's standard gift card packaging. Compare the packaging and PIN to others on the shelf.
- There may be no physical signs of tampering, but the balance does not match what you purchased.
