Gift Card Fraud Exposed: How a 3 Man Scam Ring Was Stopped While Retailers Fail to Act

Welcome to Scams, Hacks and Frauds! In today's episode, we dive deep into a fascinating true crime story about a notorious gift card fraud ring of three Chinese nationals in the US. This group spent tens of thousands of dollars daily on tech gadgets at major retailers using fraudulently obtained gift cards. 

Join us as we follow one of their shopping trips, uncover how their operation was eventually stopped, and reveal the shocking details uncovered during the arrest. 

We also explore why many retailers fail to detect or stop this form of fraud and how this enables money laundering on a massive scale. 

If you're interested in understanding these scams better and protecting yourself and your family from similar fraud schemes, listen closely and check out recommended creators Kitboga and Jim Browning who specialize in scam investigations.

Kitboga - https://www.youtube.com/channel/UCm22FAXZMw1BaWeFszZxUKw

Jim Browning - https://www.youtube.com/JimBrowning

We publish new content every other Monday. The  10 minutes our episodes may save your wallet, and help protect your family.

If you like shows like "The Perfect Scam" or "Darknet Diaries" then this show might be for you.  

On our website you’ll find more computer hacking, identity fraud, impersonation, consumer rights and Romance Scams.  To find these and to access our transcripts, visit us at www.scamshacksandfrauds.com.

The transcript and spoken audio are available under the Creative Commons, Share Alike, With Attributions license. For more information on this visit creativecommons.org.  

Transcript

Have you ever watched a Scam video or heard a scam story where someone was fooled into buying gift cards?  Have you ever wondered what the scammer actually does with them, since they’re not real money?  This week on Scams, Hacks and Frauds, we’ll tell you what one particular scam group does with gift cards, and how they were caught, because this is the True Crime podcast that helps keep your family safe from Scams, Hacks and Frauds.

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It's October 19, 2023 at Target in Salem, New Hampshire.  Three men, Naxin Wu, Mengying Jiang, and Mingdong Chen, enter the Town’s Target store.

They grab a cart and pass the Starbucks, following the path between women's wear and underwear.  They then round the corner near the fitting rooms.  Just beyond the men's section, but before the entertainment section, sits their goal, the technology section.   It's a path they could walk with their eyes closed, as they’re here almost every day.

Once they reach their goal, they load up the cart with iPhones, Apple Watches, Powerbeats, and other high-value technology goods.  Their carts full, they head to the checkout and watch as the cashier scans each item, the total increasing with each scan until it reaches $12,356.65.

The total reached, one of the men brings out literally dozens of digital Target Gift Cards, including at least 35 valued at $200 each.  The Cashier scans each one in turn until the balance is paid in full.

Is this some sort of special trip, perhaps buying gifts for Christmas or Chinese New Year?  No.  Every day, they receive a new set of instructions from their handlers on WeChat, an online messenger service popular in China, directing them to take specific cards to specific stores in New Hampshire, where they will again spend up big on tech, paid for by  Gift Cards.

Why New Hampshire?  Unlike many other American states, there’s no sales tax in New Hampshire.  They might be fraudsters, but that doesn’t mean they can’t be smart with their money.

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We move now to December 28.  MingDong Chen is in Concord, New Hampshire.  Chen has been given another batch of gift cards, and he’s doing another version of the exact same shopping trip, this time at Walmart.  He again purchases a cartload of expensive technology items and cashes them out, using gift cards.

What Chen doesn’t know is that one of those cards was purchased by a man in Alabama - another part of the organisation has managed to steal the card number and PIN and relayed this to Chen via WeChat- Once its owner sees it's been used, he reports it stolen to the police.

Walmart is more than happy to help the police in their investigation into who used the card and can track Chen all the way to his car.  Officers in Concord then searched for the car, and when they found it, it was pulled over.  The driver was indeed Chen, who was found with over $20,000 in Gift Cards and technology in his car and was immediately arrested.  Through a translator, Chen confirmed he was picking up technology for his boss, which he then delivered to a warehouse in New York.

His reward? A mere $10 per device.  The devices are then shipped to compatriots in China and elsewhere, and sold for cash.

Chen was subsequently taken to Jail.

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We now move forward to January 4, 2024.  You might have thought that Chen’s disappearance would have made Wu and Jiang more cautious, or stop their actions.  You’d be wrong.

Following some addresses found on Chen’s phone, the police are now outside of the apartment shared by Wu and Chen, and as the police enter, both Wu and Jiang are there.

Not only did the police find at least 74 iPhones and around $30,000 in cash during the raid, but UPS also arrived with another 15 iPhones, showing the scheme wasn’t limited to in-person shopping runs.

Also in front of the police was Jiang’s Laptop, screen open to a chat with Walmart and Best Buy gift cards being transmitted to the pair in real time.

They also found documents pointing to a warehouse in Salem.  A further raid, 5 days later (January 9), found $8 million in Apple products, as well as gift cards, receipts, additional electronic devices, and another $10,000 in cash, not to mention another 2,000 counterfeit Apple products.

All goods that would presumably be sold somewhere to help disguise the theft and fraud that funded them.

All three accused plead guilty for their parts in the gift card fraud conspiracy and have been sentenced to between 2 and 5 years in prison, and will be deported to China on release.  But they’re only part of what's likely to remain a massive operation, with similar cells found elsewhere across the US.

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Here we can see a clear and present problem with how retailers process and sell gift cards. 

Do you know anyone in your life who would pull out 50 or more gift cards to make a single purchase?  Have you ever seen this in a store?  I am willing to bet that the answer is no for most of you.

So why aren’t transactions like this somehow flagged up?  Although it's great that Walmart cooperated with the police when contacted, these retailers could, if they chose to, put an end to this fraud tomorrow.

If you walked into your bank and tried to withdraw $10,000 in cash, your bank would ask you what you intended to use it for as part of its anti-money laundering checks.

If you try to cross an international border with $10,000 in cash, customs are going to want to know about it, so why doesn’t it occur to anyone in these retailers that someone paying for purchases with gift cards in the tens of thousands day in day out, to the point that staff recognise them, is not a normal thing for someone to be doing?

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Some of the cards in this case have been linked to Elder Abuse Scams.  There’s not a lot of specific details that we can construct a narrative around, but this is when an older person is convinced by a scammer, usually on the phone, to go to a store to buy gift cards with their money, either to as part of a tech support scam, or to prevent themselves or a loved one from being arrested; in more harrowing cases it can be a romance scam like we’ve covered before.  Although some stores now post signs warning people about gift card scams, the sale of gift cards continues without any real restrictions - despite every single one of us knowing this goes on.

A simple daily limit or transaction limit - say no more than $100 in gift cards sold, no more than $200 or 3 cards redeemed in a day would still allow us to give gift cards to our loved ones, whilst making gift card fraud incredibly inconvenient and unappealing to fraudsters and scammers, and it is a mystery to us why this hasn’t been done when so many other businesses like banks, insurance companies and casinos are required to look out for this sort of thing.

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If you’ve gotten this far in the show, you probably know already that Gift Cards are only good at the store, or stores, that the Gift Card is for.  You can’t pay someone’s bail, or customs charges, or any government bill with a gift card, and if McAfee or Norton need a gift card to solve a problem where they over-refunded you, an Apple or Best Buy Gift card won’t help you with that either.

So rather than go into that detail, there are two things I’d like us all to do today.  The first is, obviously, to share this show with your loved ones to keep your family safe from Scams, Hacks, and Frauds.

But the second one is to share something else.  I’m going to put some links to some videos of a couple of scam baiters, Jim Browning and Kitboga, in the description.  These creators take calls from Scammers who try to get people to pay them in Gift Cards and Crypto.  They’re entertaining, particularly Kitboga’s characters he uses, and Jim is very good at catching them off guard by breaking into the Scammers' own computers and calling them by their real names.

Please share them with people you know who may not be as tech-savvy.  As your loved ones are laughing away at scammers, they’re also learning what these scams really sound like and what scammers ask them to do.  That way, if they ever get one of those calls, they’ll immediately know what's going on, and maybe even waste the scammers' time themselves.

And if you do run a shop, please do put a sign up next to your gift cards warning people who might be caught in a scam that these should only be used to give to friends and family, and that companies and governments will never ask someone to buy them. If you can, set a sensible daily limit to prevent you from becoming a link in an international money-laundering chain.

I’ve been Cee, and this has been Scams, Hacks and Frauds.  Please like and subscribe to help us keep your family safe from Scams, Hacks and Frauds.