Rising Threat of Gift Card Fraud Linked to Chinese Crime Rings
A recent U.S. Senate hearing shed light on a growing issue: gift card fraud schemes orchestrated by Chinese organized crime rings. These schemes, known as “card draining,” have swindled hundreds of millions of dollars from American consumers, prompting the Department of Homeland Security to launch a task force to tackle the problem.
How Card Draining Works
Criminals acquire gift cards from stores, tamper with them to obtain card numbers and PINs, and then return them to the store. Unsuspecting customers purchase these manipulated gift cards and load funds onto them, enabling the criminals to access and steal the funds online. The stolen money is often converted into high-value goods like iPhones, which are then sold abroad to complete the illicit financial cycle.
Scope of the Issue
In recent months, law enforcement agencies have made several arrests related to gift card fraud, particularly targeting Chinese nationals or Chinese Americans. Around 100 individuals have been apprehended, with the majority linked to Chinese criminal groups. These organizations employ “runners” to carry out the fraudulent activities on the ground.
Notable Cases
Examples abound of individuals caught in the act of card draining. For instance, Ming Xue was arrested in Ohio after visiting multiple Walmart stores in a single day with thousands of altered gift cards in his possession. Similarly, Donghui Liao was apprehended in Florida while restocking stolen gift cards at a Target store.
Growing Trend
The prevalence of gift card scams has been steadily increasing, with nearly 60% of retailers reporting a rise in such incidents in recent years. This trend is concerning given the substantial amount of money Americans spend on gift cards annually, expected to exceed $200 billion in 2024.
Conclusion
The surge in gift card fraud, particularly orchestrated by Chinese crime rings, underscores the need for concerted efforts by law enforcement and regulatory agencies to combat this form of financial crime. Heightened awareness and preventive measures are essential to safeguard consumers from falling victim to these increasingly sophisticated schemes.
