Walmart Implicated in Vast Gift Card Fraud Network, Raises Concerns Over Company’s Compliance Efforts

An in-depth investigation by ProPublica has uncovered Walmart Inc.’s involvement in a sprawling fraud network centered around gift cards and money laundering. The report highlights a notable case involving Christy Browne, a retired teacher from New York, who unwittingly became entangled in the scheme. Browne was deceived into purchasing $2,000 worth of Walmart gift cards under the false pretense of aiding an FBI investigation into money laundering.

The investigation reveals that these gift cards were actually funneled into an elaborate laundering operation orchestrated by Qinbin Chen, a Chinese national based in Virginia. Chen’s operation, which spanned across the United States and China, managed to launder approximately $7 million in fraudulently obtained gift cards, victimizing hundreds of individuals. This intricate scheme has been dubbed “The Walmart scheme,” shedding light on Walmart’s troubling history as a hotspot for fraud.

According to the Federal Trade Commission (FTC), Walmart has been responsible for over $1 billion in fraud losses from 2013 to 2022, despite its commitments to regulators and enforcement efforts. The company’s financial services, particularly gift cards and electronic money transfers, have consistently been exploited by scammers. ProPublica points out that Walmart’s lack of stringent employee training and failure to implement effective anti-fraud measures have significantly contributed to these losses.

In 2022, the FTC filed a lawsuit against Walmart, alleging that the company turned a blind eye to criminals utilizing its financial systems. A federal judge involved in the case stated that Walmart was aware of its services being used by fraudsters and had been repeatedly warned about specific stores where fraudulent money transfer activity was rampant. Walmart is currently seeking to have the lawsuit dismissed, arguing that it bears no responsibility for the criminal conduct of third parties. The company contends that such schemes are reasonably avoidable by consumers.

Qinbin Chen, the mastermind behind the gift card laundering operation, had been engaged in this illicit activity for five years until his arrest in 2021. On September 14, a jury swiftly reached a verdict, finding Chen guilty on all eight charges. His sentencing is scheduled for February, and he could face a prison term ranging from two to 20 years.

Despite these challenges and controversies, Walmart is expanding its financial services by acquiring the online banking platform One. However, concerns persist regarding the company’s ability to effectively manage these services, given its history of compliance issues and reluctance to address fraud within its systems.

This development not only impacts Walmart but also has implications for related stocks such as Amazon.com Inc. and Target Corporation, as well as ETFs like Consumer Discretionary Select Sector SPDR Fund and Vanguard Consumer Discretionary ETF.

As the investigation unfolds, the spotlight remains on Walmart’s role in enabling this vast gift card fraud network, raising questions about the company’s commitment to combating fraud and protecting its customers.

 

CrimeDoor
Author: CrimeDoor

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