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A coordinated refund fraud scheme has cost online retailers like Walmart and Amazon millions, according to Federal prosecutors.
In an indictment filed under seal last month, US attorneys detailed how a crime ring recruited legitimate shoppers to "purchase an item, have the purchase refunded, and, through various means, keep the refunded item for personal use or sell for profit."
The filing was recently unsealed and first reported by tech investigations site 404 Media in collaboration with Court Watch.
Ten individuals, referred to as the Artemis Refund Group (ARG), are charged with conspiracy to commit wire fraud following a multi-year operation that falsely initiated refunds or returns for shoppers' completed e-commerce orders.
Walmart acknowledged Insider's request but did not immediately have a detailed response for this story. Amazon did not immediately respond to Insider's request for comment.
Per the indictment, ARG would obtain order details from shoppers, which it would use to interact with customer service departments on the shopper's behalf.
If the retailer provided a no-return refund, ARG would take a percentage cut, and the customer would keep the item. Retailers like Amazon, Walmart, and Target sometimes offer no-return refunds when the cost of the return outweighs the value to the seller.
If the seller required a return shipment, ARG would send a fraudulent package.
If the retailer sent a replacement, ARG would receive the shipment, sell it, and split the proceeds with the shopper who kept the original item.
ARG also recruited company insiders, including staff at Walmart's returns department, to boost the scam's success rate, per the indictment.
Prosecutors say thousands of shoppers used ARG's scheme to effectively get items for as much as 85% off, typically for high-priced items. In February, a government informant bought a $541.41 Kate Spade handbag using ARG's scam, and in May, they used it to get a MacBook Pro from Amazon.
The volume of transactions was so numerous ARG organized them in a spreadsheet. The number of returns was so many that one defendant rented a storage unit, prosecutors said.
Amazon acknowledged this scam had cost the company more than $700,000, while prosecutors said return fraud in general has cost other retailers involved "well into the millions of dollars."
404 Media also found numerous Reddit and Telegram groups openly swapping tips on perpetrating refund fraud, with specific advice for individual retailers. The outlet found at least six such subreddits, including r/illegallifeprotips2, which has over 100,000 followers.
The publication also noted that delivery drivers, many of them gig-workers, are often the ones to bear the brunt of customer complaints about missing or damaged shipments.
