Avoid buying tampered gift cards at all costs. According to data from the U.S. Department of Homeland Security, gift card fraud carried out by organized crime groups from China is spreading globally. Criminals are increasingly hiring “mules” to manipulate gift cards using sophisticated methods and exploiting online vulnerabilities.
The Homeland Security Investigations (HSI) launched the “Red Hook Project” last year to specifically combat gift card fraud activities led by Chinese organized crime groups. Adam Parks, the head of the Red Hook Project, stated that these criminal groups view gift cards as a “quick way to get rich with little to no legal consequences.” Department of Homeland Security data shows that funds obtained from gift card fraud are often used to support illegal activities such as fentanyl smuggling, illegal immigration, and human trafficking.
In mid-last month, Sacramento police in California busted a cross-state gift card fraud case, arresting four Chinese citizens and seizing over 7,000 gift cards along with confiscating two vehicles. They also uncovered a hotel room used as a hub for altering gift cards and as a logistics center.
Authorities revealed that these four individuals illegally crossed the southern U.S. border a year and a half ago and then traveled to eight counties in Northern California, as well as to Washington, Oregon, and Nevada, targeting over 100 grocery and hardware stores to commit fraud. Over the past year, the local police department’s retail crime task force has recovered approximately 20,000 altered gift cards.
In February this year, U.S. Border Patrol Agent Gregory K. Bovino announced on his X account that Border Patrol officers in Indio, Riverside County, California arrested five Chinese citizens during an inspection, seizing thousands of gift cards, merchandise, and 23 fake Pennsylvania driver’s licenses.
Also in February this year, two Chinese individuals from California were arrested at a CVS store on Staten Island, New York, for engaging in gift card fraud. The two were found stealing gift cards from CVS, returning them to the shelves, and were later caught with 395 gift cards in their possession.
Authorities stated that these individuals would steal a large number of gift cards from CVS, take them back, carefully scratch off the gift card, obtain the password, barcode information, etc., then cover the scratched area with stickers, reseal them, and put them back on CVS shelves.
The “auditors” of the criminal group use balance inquiries and other tools to monitor when consumers purchase and load funds onto the cards. Once consumers buy and activate the gift card, the scammers swiftly use the password to steal the cash inside the card. One suspect confessed to police that he earns a reward of 50 cents for each gift card he steals.
Police further pointed out another type of gift card fraud, where scammers paste fake barcode stickers over the genuine barcode of the gift card. When the consumer purchases and adds money to the gift card, the cashier scans the barcode, and the money is transferred to an account linked to the fake barcode.
The “Red Hook Project” provides the following signs of tampering for consumers to reference:
– Packaging seals are damaged or have unnatural cuts.
– PIN code overlay is uneven or cracked.
– Packaging design or brand markings have subtle differences from other products.
– Unusual balance discrepancies discovered after purchase.
The Department of Homeland Security advises consumers to carefully inspect packaging before purchasing, quickly use gift cards, or transfer the balance to a digital wallet to avoid losses.