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Holiday Shoppers Beware: Gift Card Fraud Scheme Goes Nationwide

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Holiday Shoppers Beware: Gift Card Fraud Scheme Goes Nationwide
Nahal Garakani
December 13, 2023

Law enforcement agencies across the country are sounding the alarm about a dangerous form of gift card fraud known as “card draining” this holiday season. Authorities report busting what they describe as a highly sophisticated scheme just this month to steal funds off gift cards before recipients can spend them.

The Sacramento County Sheriff’s Office in California arrested a man caught tampering with thousands of gift cards last week. Detectives had observed Ningning Sun acting suspiciously in the payment aisles of a Target store before confronting him trying to exit with over 5,000 gift cards lifted from Target and Apple. An investigation revealed Sun took part in a broader gift card scam operating statewide in California and beyond.

“Victims are completely unaware it is happening, and the money is often siphoned to an off-shore account within seconds,” the Sacramento Sheriff’s Office said. New Britain Township Police in Pennsylvania issued a similar public notice after receiving reports of over 100 gift cards tampered with at local Giant grocery stores.

Authorities say the card draining ploy involves carefully prying open sealed gift card packaging, then manipulating the redemption code on the card itself. The scammers scratch off a top layer obscuring the code, allowing them to capture and steal the loaded amount before the intended recipient can spend it. New Britain Police advised customers to inspect all gift cards closely before purchase.

“If a gift card is suspected to have been tampered with or opened, do not buy it and bring it to the store manager or service desk,” their notice read. The Sacramento Sheriff’s Office concurred, warning the modifications made to drained cards are “often virtually undetectable, even to the trained eye.”

Still, authorities provided advice on protecting gift card purchases from fraud this season. They instructed shoppers to ensure any gift card they select appears factory sealed, with protective coverings and taping fully intact. Consumers should keep purchase receipts as well, officials added, in order to secure refunds if tampering is later detected.

Some police suggested avoiding buying gift cards altogether to eliminate the risk. But gift cards remain hugely popular gifts, with over $200 billion worth sold annually in the U.S. alone according to industry estimates. Analysts project 2022 holiday sales of gift cards rising 15% year-over-year, as inflation pushes more shoppers toward reliable gifts allowing recipients to pick their own present.

The appeal and convenience of gift cards make them prime targets for scams, however. The non-profit AARP warned elderly Americans specifically of risks back in September as the card draining scheme spread. Fraud tracking groups highlighted foreign fraud rings based in countries like China or Russia frequently perpetrating similar gift card schemes.

Sacramento authorities arrested Sun on charges of grand theft, identity theft, and tampering with computer data. But the Sheriff’s Office statement warned they believe at least two additional suspects worked with Sun, and likely many more nationwide. The fast-moving, sophisticated operation allows the scammers to conceal their identities and make off with cash before stores or consumers detect anything amiss.

Still, prosecutors can pursue felony charges against those they catch tampering with or stealing gift cards under various state laws. California, for one, has statutes specifically criminalizing theft through manipulating gift certificates or stored value cards. The legal penalties aim to deter would-be scammers from attempting to profit off duping holiday

shoppers.

Consumer rights groups advise contacting both local police and the major gift card brand’s customer service to report any suspected fraud or draining. Retailers often keep video surveillance footage that can aid investigations, while open fraud reports may help victims secure refunds. Companies like Visa, Mastercard, or American Express may also have additional fraud protections on branded gift cards offering potential recourse.

But authorities ultimately want shoppers taking precautions themselves this season after busts in multiple states revealed how easily scams can separate loving gift-givers from their hard-earned money. Carefully checking packaging, keeping receipts, and even reconsidering gift cards altogether may help consumers avoid heartache from having holiday gifts drained by crooks instead of cherished by friends or family.

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