Overview of the case

Partially translated from: 5newsonline

A Chinese student was arrested on theft by deception charges for allegedly participating in a nationwide Walmart gift card scam involving millions of dollars.

On November 4, 2019, Walmart global investigators contacted the Benton County Sheriff’s Office Criminal Investigation Division regarding an ongoing theft investigation involving various phone and internet scams.

Walmart global investigators had been monitoring 23-year-old Songhua Liu during the final several hours of his trip across Arkansas. Based on the suspect’s pattern of activity, investigators believed Liu would use fraudulently obtained gift card numbers at Walmart stores in Benton County. Those gift cards came from victims who had been persuaded, coerced, or tricked.

The scam and money-laundering process reportedly worked like this:

  • Scammers contacted victims by phone, email, text message, and other methods, convincing them that they owed money or unpaid taxes and needed to pay using gift cards.
  • After buying the gift cards, victims took photos of the cards and sent them to the scammers.
  • The “runner” (Liu, the person arrested in this article) received the gift card numbers from the scammers and used a smartphone to load the gift cards into an app, allowing them to be used at Walmart via a UPC. After that, the gift cards could be used at checkout. They generally purchased Prepaid Card products or other third-party gift cards.
  • The runner sent the purchased gift cards back to the scammers, who paid the runner a portion of the proceeds in RMB.
  • The scammers then resold or otherwise disposed of the gift cards through various channels (the article speculates that these gift cards, which could be used in China, may have been sold on Taobao).

Investigators believe that most of the runners were Chinese nationals. Liu was only one participant in the scheme, but investigators believe he was part of a multimillion-dollar fraud operation.

Police learned that Liu had stayed overnight at a hotel in Fayetteville. Investigators saw him leave the next morning (November 5) at 9:30 a.m. After leaving the hotel, Liu visited at least 5 Walmart stores between Fayetteville and Rogers, completing transactions ranging from $ 1,000 to $ 3,200 each time. Later that day, investigators saw Liu make another transaction at a Walmart in Springdale before heading to Rogers. At approximately 4:22 p.m., Liu arrived at the Walmart in Rogers. Investigators waited inside the store and watched Liu take gift cards at the self-checkout area, choose a red gift bag, and then enter the self-checkout section. Investigators saw Liu scan what appeared to be a UPC-displaying device before scanning multiple gift cards, which matched exactly the method described by Walmart investigators. After completing the transaction, Liu attempted to leave the store. Detectives approached Liu, handcuffed him, seized the bag full of gift cards, and placed his phone in airplane mode. Authorities confirmed that Liu had completed a transaction at the store totaling 1408.82 dollars.

Liu was arrested on theft by deception charges and taken to the Benton County Detention Center for a probable cause hearing. He is expected to face federal charges for participating in the fraud scheme.

Liu is a Chinese national in the U.S. on a student visa. Records show that he lived in Amherst, Massachusetts, and had attended the University of Massachusetts.

He admitted visiting many stores in the state and completing gift card transactions. His bond was set at $50,000.

What crime did Liu allegedly commit?

Based on the news report, Liu does not appear to have been the person who originally obtained the Walmart gift cards through fraud. More likely, this was a large organized phone scam targeting Americans and Chinese speakers in the U.S., and Liu became a key link in the disposal of the stolen value. If Liu knew the cards came from fraud, the charges against him could be more serious, and he could be viewed as part of the scam ring itself. However, judging from the bond amount, which was only $50,000 (bail for Chinese defendants is often set quite high; there have even been traffic-accident cases with bail as high as $1 million), authorities may not have viewed Liu as a direct participant in the original scam. From the wording of the report, there were probably quite a few “runners” like Liu.

How is this different from the Milwaukee international student gift card resale case?

In the earlier Milwaukee case, a Chinese postdoc bought a large number of Target gift cards at a discount from an upstream source, then used them at Target to buy Itunes gift cards and resold those to China. That case is somewhat similar to Liu’s: both involved using gift cards from major retailers to buy third-party gift cards in order to launder the value. So why not just sell Walmart gift cards directly? Because WM gift cards are mostly useful only in the U.S. If they are converted into gift cards such as itunes or google play, people in other countries can often use them directly through the app store (for example, by registering a U.S. app store id). That makes tracing the funds much more difficult. And if the resale does not happen on a U.S.-based platform, U.S. law enforcement may have a harder time investigating. In that sense, this laundering step significantly increases the difficulty of tracing the fraud.

In this case, Liu allegedly just received gift cards from an upstream source, bought third-party gift cards, and handed them back in exchange for a fee. At least at first glance, the conduct here seems less serious than that of the Milwaukee postdoc, who actively sourced and resold the cards.

Common scams in the U.S.

In the U.S., Chinese immigrants and especially international students are often particularly vulnerable to scams. After all, when living abroad, many people are unfamiliar with local tax rules, laws, and government agencies’ authority. Many students also have relatively limited social circles, so when something happens, they may have no one to consult and can panic easily. In addition, students often have limited ability to work and may have more free time, making them easier targets for small financial temptations. Below is a quick roundup of several common scams in the U.S.

“IRS” scams

The IRS is the Internal Revenue Service. If there is a problem with your tax filing, the IRS may contact you to request additional materials or payment. However, the IRS does not contact people by phone, email, or through a third party. The official way they contact you is by mailing a notice to your address.

IRS scams are extremely common in the U.S. Typically, scammers exploit the victim’s fear by fabricating claims that the victim owes money or will be arrested. In a panic, victims may follow the scammer’s instructions and send money. Also, you generally cannot tell where a call is really coming from based on the number shown on your phone, because caller ID can be hidden or spoofed.

“Chinese Embassy” scams

In recent years, scams involving callers pretending to be from the Chinese Embassy have become increasingly common. One friend even said that everyone in the office had received this type of call. The excuses are usually things like your identity was stolen, you were implicated in some kind of case, or there is a problem involving your family. Scammers may even list personal details about you—your school, major, family members, and more—to gain your trust. Just remember one thing: government agencies do not deliver this kind of information by phone. Do not believe them, and also warn your friends and family so scammers cannot use your personal information to deceive people around you.

Deeply discounted gift cards

As mentioned above, the Milwaukee postdoc was convicted after purchasing a large number of gift cards of unknown origin from an upstream source and reselling them. In international student circles—especially on forums and social media—it is common to see people offering gift cards for sale. In many cases, the seller may genuinely just need to sell a card, but if you see the following warning signs, be extra careful.

  • Prices that are far too low: a discount of around 10% to 20% off face value is relatively normal for gift cards. But if someone is selling Walmart, Target, Amazon, or similar gift cards at half price, do not trust it. Those cards may have come from scams or stolen credit cards.
  • Unusually large volume: an ordinary person usually would not have that many gift cards on hand. If someone is selling a large quantity or has been selling discounted gift cards for a long time, pay very close attention.
  • Odd amounts: when people give gift cards to each other, they usually give round-number cards. If someone is selling a lot of gift cards with strange cents amounts, they may have come from merchandise returns. And those returned items may have been stolen. If you run into this situation, it’s best to ask where they came from first, or request to see the receipt or similar proof.

In short, remember that if a deal looks too good to be true, it usually is. And most importantly, don’t let bargain-hunting turn you into a channel for someone else to unload stolen goods.

Cheap luxury goods / hotels / Uber

There’s a good chance that cheap luxury goods were bought with a stolen credit card, or that someone falsely claimed the item never arrived and quietly kept it. Just like discounted gift cards, unusually cheap items often come with hidden issues. Personally, I never believe that if there’s easy money to be made, someone would just hand that opportunity to you for free. It’s like investing: if the profit is really that high, why would they need you at all?

Hotels and Uber sometimes post charges with a delay, which means the actual cardholder may not realize right away that their card was stolen. That makes this easy to exploit. For example, someone uses a stolen card to book a hotel for you, and you pay them. Later, the stolen card is reported, the hotel can’t charge that card successfully, and the problem ends up falling on you. By then, the person you paid is nowhere to be found.

Getting paid to buy gift cards for someone else

Just like in the example in this post, it may look like a simple arrangement: use someone else’s card to buy gift cards and get paid a fee for doing it. It may even seem like you’re not risking your own money, especially if they directly hand you the card. But the risk is actually significant. What looks “risk-free” can turn you into the person helping dispose of stolen goods.

Currency exchange scams

Many international students have probably exchanged money with friends before. But if you’re exchanging money with someone you don’t know, especially someone you only met online, be very careful. In general, if the other party wants to receive RMB via Alipay or bank transfer, those payments are usually hard to charge back. But if they send you QuickPay or PayPal, those can potentially be charged back. The safest way to exchange money is at a bank: one party hands over the cash, the money is deposited immediately, and then the transfer is sent. That also helps avoid counterfeit bills.

Craigslist and eBay scams

Sometimes when you sell used items on CL, a buyer will say they’re out of town or in the military and can’t meet in person. They’ll ask you to ship the item, and then say they’ll pay you by PayPal or bank transfer. On Craigslist, the most important rule is cash in hand and item in hand at the same time.

eBay is the same way. If a transaction can be completed through eBay, do not trust requests to move the deal off-platform. PayPal payments can be chargebacked, and someone could also use a checking account with no money in it. Be especially careful with e-check payments: do not ship until PayPal explicitly says the funds have cleared and it’s okay to ship. Also, some people abuse eBay returns to scam sellers: they receive the real item, then “return” a rock and claim that you were the one who shipped the rock.

What to watch out for when using gift cards

Regular version

For ordinary spending, the amounts usually aren’t very large, so there generally isn’t much to worry about.

Jargon version

The tips below are for MS folks and “little nurses,” so they may include some industry slang.

  • If you’re loading a large number of Visa gift cards or buying large money orders (MO), remember to bring the original card receipt and your driver’s license. As long as you can prove you bought the cards yourself and are loading money to your own card, it generally should not involve money-laundering issues. Of course, if the Visa gift cards were purchased with cash, you could still be suspected of ML. Presumably people who do MS aren’t that careless...
  • When buying Visa gift cards or doing AMEX OFFER deals, try to use your own cards. If you’re using a family member’s card, keep a low profile. If that gets scrutinized, it can become a huge headache.
  • When traveling, don’t carry around a huge stack of cards, especially cards in both your own name and other people’s names. (These days there are far fewer AMEX offers than before, so the old days of flying somewhere with dozens of cards to do Rite Aid offers probably aren’t coming back.)
  • If you’re using gift cards to buy other gift cards, keep it low key. If it starts drawing attention, just leave. Merchants are mainly worried about fraud, money laundering, and gift-card abuse—not the simple act of exchanging one gift card for another. Their actual losses usually aren’t that large. Still, it’s best to have your receipt on hand, because without it, explaining yourself can be difficult.
  • Throw away empty gift cards and Visa gift cards in separate batches, or cut them up before discarding them.
  • If a “miracle doctor” provides a large number of gift cards and asks you to place orders, be careful. If those gift cards are from questionable sources, that can also create serious problems.

In reality, MS behavior can look somewhat similar to the kinds of situations above involving arrests or money laundering, so keep good records and evidence and you should have less to worry about.

Conclusion

  • Don’t be greedy for a bargain! Talk things over with friends and family when something seems off.
  • Don’t be greedy for a bargain! Talk things over with friends and family when something seems off.
  • Don’t be greedy for a bargain! Talk things over with friends and family when something seems off.