TYLER, Texas - Four people have been arrested in an organized gift card tampering operation that stretched across Texas and Arkansas, with investigators recovering hundreds of compromised cards representing more than $100,000 in potential losses from a single day of activity.
The Texas Financial Crimes Intelligence Center led the investigation, which resulted in arrests during separate operations in Sugar Land and Tyler.
Authorities identified the suspects as Deshun Zheng, Minjiang Chen, Xiaoqiang Yu and Minlin Chen. All four are charged with fraudulent use, possession or tampering with gift card data, a first-degree felony under Texas law.
Investigators said the group used a method commonly known as gift card draining.
In the scheme, gift cards are removed from store displays and taken elsewhere, where the protective coating covering the PIN is peeled back. The card's activation information and serial number are recorded before the card is carefully resealed and returned to a store shelf.
When an unsuspecting customer purchases the card and adds money to it, the compromised information allows the balance to be electronically drained, sometimes within minutes.
The investigation began in June after Walgreens investigators alerted TX FCIC agents to tampered gift cards discovered on store shelves in Willis. Walgreens provided investigators with photographs of a suspect and a white Lexus NX associated with the activity.
Working with retailers, investigators identified additional suspects and a second vehicle, a white Mercedes C300.
On June 26, agents working with Sugar Land police arrested Zheng and Minjiang Chen after investigators said they watched the pair place tampered gift cards at Dollar Tree and Family Dollar stores in Sugar Land.
The investigation expanded in July when authorities learned the suspect associated with the Lexus had traveled into Arkansas.
Investigators worked with Walgreens, Target, Walmart, CVS, Albertsons and Dollar Tree to identify suspected tampering and remove compromised gift cards from store shelves. The Arkansas Attorney General's Office and Willis Police Department are pursuing separate cases involving suspected fraud in their jurisdictions.
The investigation then led authorities to Tyler.
On Aug. 24, TX FCIC agents and Tyler police arrested Yu after investigators said they observed him placing tampered gift cards at Walmart and Walgreens stores.
A search of his vehicle uncovered bundles of compromised cards intended for other stores, according to investigators.
Agents later executed a search warrant at a nearby hotel, where they arrested Minlin Chen. Investigators said they found hundreds of additional tampered gift cards along with tools used to compromise and reseal them.
Authorities said the cards recovered during a single day of the investigation represented more than $100,000 in potential losses.
Investigators believe the suspects worked together to steal cards from stores, alter them in hotel rooms or residences and return them to retail displays while retaining the information needed to access the cards once customers loaded money onto them.
