Not even your gift cards are safe from fraudsters

If recent headlines are any indication, gift card scams have become a lucrative enterprise for organized criminals.

On this week’s episode of Village Media's Closer Look podcast, we revisit an eye-opening conversation we had with Ritesh Kotak, a lawyer and cybercrime expert.

He explains how these scammers operate, why gift card fraud is on the rise — and how you can protect yourself as a consumer.

Transcript

SPEAKER_01 0:00

The thing is, is that you think you're putting it on the gift card that you just picked up, but in actuality, the code on it that's been replaced is for another legitimate gift card.

SPEAKER_03 0:40

It's a growing problem right across North America, worth millions of dollars to criminal organizations. And the fraudsters ripping you off have made quite a few headlines lately. Here in Ontario, the most recent big bus came courtesy of Halton Regional Police, who arrested two men last month and seized thousands of fraudulent gift cards in an investigation dubbed Project Reload. On this week's episode of the program, we're going to revisit an eye-opening conversation we recently had with Ritesh Kotec. He's a lawyer and cybercrime expert who understands how these fraudsters operate, why gift card scams are such a lucrative enterprise, and how you can protect yourself as a consumer. Here now is that interview. Let's start with what's the most common scam out there, uh Ritesh, when it comes to gift cards.

SPEAKER_01 1:50

The most common scam that we are seeing, and again, a lot of this high-tech crime has a lot of low-tech ways of going about dealing with it. Um, and you know, this is the modern day Grinch, is what they're doing is they're going in and they're finding legitimate gift cards and they're printing barcodes on the gift card and they're sticking it um on uh on on the back of on the back of these packages. What happens there? Well, think about it. You pick up a gift card from your favorite, your favorite retailer, you go to you go to the counter, and what do they ask you? How much money would you like to put on it? Do you want to put $10, $50, $100, $1,000? And you're like, you know what? I'll put $100. Okay, great. They scan it and they put $100 to that card. The thing is, is that you think you're putting it on the gift card that you just picked up, but in actuality, the code on it that's been replaced is for another legitimate gift card that this fraudster ended up purchasing, mirrored the barcode, and you're actually putting money into their account. And once they're able to get money into that account, they can do a few things. They can sell those gift cards online at a reduced at a reduced price. They can go out and purchase goods and resell those goods. Um, and the list goes on and on, and people are being defrauded, thousands of dollars, and it's just a huge problem. And that's one or one of the most common gift card scams that I'm seeing.

SPEAKER_02 3:14

It's crazy. I think we just saw an example of that in Hamilton this week where the police arrested a guy, allegedly, they he was in the store kind of secretly putting these stickers on the barcodes, right? Um, and then when they they when they busted him. When when you see that happening, Ratesh, is it typically someone on the low end of an organized group that's group that's sent in to put the stickers on, or is it just one guy doing all this work?

SPEAKER_01 3:36

There's been there's been lone wolves that have just gone out and kind of, you know, these uh these uh these standalone fraudsters that have uh figured out ways of weaponizing the system, um, and all the way up to organized crime, uh, where individuals that are obviously there's a hierarchy in those uh within those organizations, um, but a lot a lot more sophisticated, a lot more resources, even harder to decipher fact from fiction and um and using it um very targeted to uh to defraud Canadians.

SPEAKER_02 4:08

It's true. I think I've also seen examples where people who they shouldn't do this, they actually post a photo of their gift card online and say, oh look, I got a gift card. But people can steal the barcode, right? And just use that as a self-checkout. Is that right?

SPEAKER_01 4:19

Yeah, so there's free software online. It's very cheap to get uh barcode printing software. Again, the last thing I want to do is create a how-to guide um on the on the podcast. That's really what we're trying to do here with I know you've opened up this can of worms, but look, it's it's it's it's important that you under that we understand the mechanisms that that that go on. And again, you know, I talked about right from the beginning. It may seem sophisticated. In some cases, it's not. Um, being able to manipulate a barcode or copy a barcode and and print it, there are free soft, there is free software out there. And you don't actually have to print get a label printer. You can literally just get it printed on a piece of paper, walk into a store and say, here's my gift card, scan it. And unfortunately, um, unless the individuals trained um ask the right questions, which they never do. It's never happened to me when I paid with a bar with uh um with a gift card. Uh, well, where did you buy this gift card? You know, how much should be on it? Uh from which location. You don't get asked those questions. They just scan it and say, Oh, yeah, you have $50 on this gift card. You want to apply all of it towards this purchase? And you're like, sure. And voila, you're you're you're out of there. And it's literally that simple.

SPEAKER_03 5:26

Ratesh, any uh stats on how often uh this is happening and and in terms of dollars lost, what's the uh what's the number?

SPEAKER_01 5:33

We're definitely talking millions of dollars that have that have been lost. We don't have the exact stats, and the reason for that is there's lack of reporting. A lot of people, um, when they do get victimized, may not report it uh to law enforcement. They'll just report it to the retailer because at the end of the day, they don't want to see someone get arrested, they just want to get their money back. Um, however, we know that this is a growing problem, and there's actually a push right now for legislation where it makes reporting mandatory. In fact, the Canadian government is expected to announce a new financial crimes agency in April of 2026, and the whole idea around that is um getting all these resources together because there is no legal obligation right now for the retailer to actually report it to the to to the police, um, for the credit card company to report it to the police as well. So, my point being, we know about hundreds of thousands of dollars, if not millions of dollars of fraud that Canadians are are impacted by. That number is significantly and grossly underreported.

SPEAKER_02 6:33

Yeah, we know that too from previous. Speaking to previous experts, we've even had the gentleman from the Canadian and the Canadian Anti-Fraud Center on here. That's usually a fraction of what is actually out there because not everyone's reporting what they're how they're being scammed. So I appreciate you bringing that up. I just want to look at one more example before we get into some general questions, Rotesh. The Kitchener Waterloo police arrested a person this week as well, and they said that they allegedly found a person concealing gift cards and replacing authentic cards with tampered ones before leaving the store. Is that the same kind of thing or is that a different kind of scam?

SPEAKER_01 7:07

The gift card companies um the and the companies that produce these cards have uh have understood that look, people are replacing the barcodes right on the right on the outside. So they're looking at new ways and new methods, potentially adding pins and other and other security measures, but you actually have to open up the package. Yes. So there have been uh situations of tampering where um where fraudsters have been able to um go out, purchase some legitimate gift cards, they go ahead and and tamper them and then replace them. So you think again, at the end of the day, you're activating legitimate gift cards, but in actuality, you're not. You're you're probably putting funds into the gift cards of these fraudsters and hackers when you actually go ahead and go to the counter and activate those cards. So yeah, they are they are becoming much more sophisticated. You're starting to see kind of the the digital world and the physical world converge into this new convergent world. And that's uh that's where we're seeing fraud headed. But yeah, you're absolutely right. Um, that people are going, these fraudsters are going into the store, physically replacing those gift cards. That's why it's very important um to make sure that um at the counter that the the person who's actually um dealing with the transaction should be trained on identifying if this is a legitimate card or or or not. Until we get those mechanisms in place, which we don't currently have, we're gonna see more of these. That's great. Uh Ritesh, what uh what advice do you have for shoppers? The best advice I have is when you're going out and making these purchases, use a credit card. Um, the reason for that is your purchase may be insured, especially if you're a victim of a fraud. If you're using your debit card, good luck getting your money back. If you're using cash, even better, you know, good luck uh getting your money back, um, use a credit card. Um it's insured. There's a chargeback process that that could that could be initiated. Um physically inspect the cards for tampering, try to see if there's any barcode that's been stuck on or any type of labeling. If anything looks off, if there's a cut or slit on the side, um just be cognizant of that. And and you know, um as an as an individual, if you're selling gift cards um or you're an employer, please throughout the holiday season, just train your employees to um what to what to look for. And finally, and I wish we would see more of this. We don't, um, it would be great to see these gift cards behind the counter instead of just publicly accessible where this type of fraud can occur. But until it's mandated or this problem starts becoming even bigger and more reported, uh, we're just not going to see that.

SPEAKER_03 9:38

Uh that's a good point because years ago they used to be behind the counter, and then somebody came up with a bright idea to put them on a carousel or you know, at the end of a uh end of a of an aisle in some merchandising display that anybody can uh can grab.

SPEAKER_01 9:51

Yeah, it speaks about friction, right? Um, the less friction you have, um, the more you know you see it. It's right on the end of the of the aisles as well. Sometimes they're near the gift uh the section where you can buy those, you know, $8, $9 uh birthday cards and and uh holiday cards. And I bought one the other day. It was so simplistic, and it was uh with taxes, it was $7.90. I was like, we gotta just move to e-cards. And anyways, that's a whole other thing.

SPEAKER_02 10:20

Oh, that's well, you see Dollarama's record profit. That's a whole other story. That's a whole other story. That's right. My loved ones buy their cards for sure. I've said this before, and I'll say it again, Ratesh. We definitely are living in a fraud world, and I I feel like we've passed the point now where we now have to assume that everything is a scam and work your way backwards. Is that accurate?

SPEAKER_01 10:38

Yeah, this whole zero trust protocol, right? Um, before the you know, the default was, you know, like we are starting off in with an element of trust, and um, and you're gonna have to do wrong to me for me to you know think uh think otherwise. Unfortunately, that's just not the case anymore. It's uh, you know, a lot of cybersecurity people say it's the zero trust protocol. That's the that's what you know, the zero trust culture is it's just go on the assumption that everything is is is a fraud and until you can prove otherwise, where whether you can validate and verify um the information, uh just given the sophistication and the prevalence of it. Unfortunately, this is the mindset for a lot of individuals, for a lot of companies, and I don't see that changing until fraud stops, which I don't think it'll ever stop, uh you know, given the jurisdictional issues, the attribution-related issues, um, the fact that it's really, you know, you have a very high reward and low risk when you think of when we hear about all the arrests, and um literally all the arrests, because it's it's very rare we hear about um arrests that that come out of it, and you know, people are being defrauded and and and uh governments are are uh are always sounding the alarm. Um this is gonna be this is gonna be a problem. So yeah, you unfortunately we're in a society, it's zero trust.

SPEAKER_02 11:56

Yeah. You you put it so eloquently in a recent column on TVO today. Technology has become a sword used by savvy scammers to harm us. We're live at the point now where the deep fakes are fooling even the most tech savvy experts and the balance of power has shifted. How do we react to that? What's the what's the number one thing we can do as a society, as government to try to kind of nip this and nip this? I mean, it's just it seems like it's it's uh it's beyond beyond that point.

SPEAKER_01 12:22

Education. Like that's literally having these types of conversations. Um, the more people that listen to the podcast, the more people that um read those uh op-eds and and talk to family members and friends that are um that can um provide these types of these these tips. Uh we have to inoculate ourselves from uh from these types of frauds. And the only way to do that is gonna be via education, going out, having those roundtable discussions, listen, doing more of these podcasts. Other than that, I can't really think of anything. Yes, we can have stricter penalties, we can put rules um uh on vendors, you know, we can put gift cards behind uh behind behind the counter, but you know, we're still gonna see some of these uh some of these some of these issues. Um I you know, I I'll share a quick story. Please. Um I was I just delivered a keynote out in BC. I think there were like 700 people there. Um phenomenal. I think that keynote went really well. And then as I finish up, I post it on LinkedIn. Um, I get a call from a friend of mine. He's a retired uh um police officer um in the in the greater Toronto area, and he calls me up and he goes, Ritesh, I need a I need a solid. And I said, What's up? He goes, Can you uh come and talk to my church group in the in on the weekend about frauds? And I was like, sure, yeah. How many people are you expecting? And he goes, eight. I was like, well, I just presented like 800. Yeah, sure, absolutely. Happy to happy to do it. And I went and I was in this church basement. I get delivered a uh a talk. It was funny, they all brought their iPads because they thought I was gonna fix all their iPads and update it and deal with all of that. But we had a very um in-depth discussion, and you know, some of the questions they were asking, and and I've been on TV, you know, hundreds of times talking about this. I've written about it, um, I've done numerous podcasts, and you know, it was until they heard it um from me face to face, and I was able to have those one-on-one discussions. They're like, oh, now I get it, now I understand why this is important. Okay, I will make sure that I hit that pause button. If there's a sense of urgency, I will, I will slow it down. I'll ask, you know, I'll call a friend. Um and um, you know, it was I know that now those eight people are are hopefully going to be able to think about these issues differently, um, behave differently as as well, and hopefully not get defrauded. You know, putting the toothpaste back in the tube is just not possible anymore. And that's the big issue. It's like, oh, okay, I will call a credit card company. Well, these chargeback processes um take forever and and uh sometimes you have an unsuccessful outcome. We hear about um banks uh not re uh refunding people as well because they're saying uh you're the one that gave the uh the one-time passcode, you're the one that um caught was in contact with the with the fraudster. We're seeing you know court cases that uh that take years to see see the see the light of day. So quite frankly, yeah, to me it's education, having these conversations, doing these one-on-one talks. Education is the only answer. Everything else, great. If you're able to get your money back, fantastic. Um, if you're able to get a remedy, amazing. But uh I to me the only solution to this is gonna be having these types of discussions.

SPEAKER_02 15:41

Yeah, it sounds like that was very successful. Your visit to the basement. It makes me think that maybe the best answer to this is just to have you go door to door. You start in Ontario. But then people would think you're a scammer, I think, after if you keep knocking on people's doors.

SPEAKER_01 15:52

Yeah, well, hopefully they're able to Google me and see a whole bunch of uh TV interviews and be like, okay, maybe this guy's uh they'll see a podcast and like, okay, he's uh he he's legitimate. But you know what? That's that's why I'm uh, you know, uh in in the summer, I'm actually thinking about getting a vehicle, wrapping it, and uh and wrapping across the country and having these conversations with uh um with individuals in church basements, in community centers, at their local clubs, because I think that's the only solution, and I think somebody has to do it. That would be amazing, actually.

SPEAKER_02 16:24

You would get a lot of coverage for that. I think that'd be a great idea because education is key. We've all have loved ones who have either been scammed or know someone who's been scammed. It's not like someone else over there. Everybody has been touched by this, and it really is. It's just about learning, it's about realizing okay, there's no panic. I don't have to rush to make this thing. You know, if my grandkid calls me for money, it's not my grandson. I can hang up the phone, I can call my grandson and see if it's actually so I think people are starting to learn that, but I think you're right, my friend. I think it's gonna take a long time.

SPEAKER_01 16:54

Yeah, that's the only way. Sometimes a grassroots uh approach is is probably is probably gonna be the answer. Look, we're we're talking about scams today, right? Um the the thing is is that especially when we the best line I heard is the bet the worst AI you're ever gonna use is right now, right? Technology is changing at such a rapid pace that it's just gonna be even harder to decipher fact from fiction. Clearly, that's gonna be incorporated into scams, and and fraudsters are gonna look for ways of exploiting individuals. That's why I think building a very strong foundation, having these conversations is gonna be very important because as the scams evolve, the principle is gonna be the same. You know, hit that pause button, validate and verify, ask a friend. Um, it's going to that is where all these things are going to are going to kick in. So it's very important. We bit gotta build that foundation because as scams continue to evolve, I think the basics around preventing these types of scam from being victimized from these scams will stay um will stay the same.

SPEAKER_03 17:57

Our thanks again to Rotesh Kotek for his time and certainly his expertise on today's show. Remember, you can follow Closer Look across all of our social channels and subscribe to our weekly email at closerlookpodcast.ca. That's our show for this week. For Zach Trunzo, executive producer, and everyone who puts this show together each and every week. I'm Scott Sachsmith. Thanks for watching and listening. We'll see you next time right here on Closer Look.