- Retailers including Walmart and Amazon have lost millions of dollars in refund fraud schemes.
- A criminal organization solicited customers to falsely claim that their e-commerce orders were damaged or never arrived.
- An investigation by 404 Media and Courtwatch found that several groups on Reddit and Telegram were openly exchanging tips for return scams.
A coordinated refund fraud scheme cost online retailers including Walmart and Amazon millions of dollars, according to federal prosecutors.
In an indictment filed under seal last month, U.S. attorneys describe how criminal organizations recruit legitimate shoppers to “purchase items, have their purchases refunded, and receive various Through various means, the refunded products were kept for personal use or sold for profit.”
The filing was recently unsealed and first reported by technology research site 404 Media in partnership with Court Watch.
Ten individuals known as Artemis Refund Group (ARG) have been charged with conspiracy to commit wire fraud following a multi-year operation of falsely initiating refunds or returns for shoppers’ completed e-commerce orders. .
Walmart acknowledged Insider’s request, but did not immediately provide a detailed response to this story. Amazon did not immediately respond to Insider’s request for comment.
According to the indictment, ARG would obtain order details from shoppers and use them to communicate with customer service departments on the shoppers’ behalf.
If the retailer issues a non-returnable refund, ARG will take a percentage of it and the customer will keep the item. Retailers such as Amazon, Walmart, and Target may offer no-return refunds if the cost of returning the item exceeds the value to the seller.
If the seller requests a return shipment, ARG will be sending an incorrect package.
If the retailer sends a replacement, ARG will pick up the package, sell it, and split the proceeds with the shopper who kept the original item.
According to the indictment, ARG also employed internal personnel, including staff from Walmart’s returns department, to increase the success rate of the fraud.
Prosecutors say thousands of shoppers used ARG’s system to effectively purchase typically big-ticket items at up to 85% off. In February, a government informant used the ARG scam to buy a $541.41 Kate Spade handbag, and in May used it to obtain a MacBook Pro from Amazon.
The volume of transactions was so large that ARG organized them into spreadsheets. Prosecutors said the number of returns was so high that one defendant rented a storage unit.
Amazon admitted that the fraud cost the company more than $700,000, but prosecutors said the return fraud overall cost other retailers involved “several millions of dollars.” said.
404 Media also discovered that numerous Reddit and Telegram groups are openly exchanging tips on conducting refund scams, along with specific advice for individual retailers. The outlet discovered at least six such subreddits, including r/illegallifeprotips2, which has more than 100,000 followers.
The magazine also noted that delivery drivers, many of whom are gig workers, often bear the brunt of customer complaints about lost or damaged packages.
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