WHERE IT STARTED
FIRST SEEN: c. 2015 (US gift-card laundering cells); Project Red Hook 2023 · GOING FOR: About 10 years
US-based laundering cells appeared around 2015 as scammers switched to gift cards; the first major trial was the Los Angeles Target gift-card cell convicted in September 2023, and HSI launched Project Red Hook in December 2023.
Gift cards became the preferred payment demand of phone scammers in the 2010s because they are untraceable and instantly redeemable. Chinese organised crime groups built a pipeline around them: 'gift card draining' crews tamper with cards on store racks to record numbers, and 'runner' cells use scam-victim cards or drained balances to buy iPhones and electronics that are shipped to China for resale. Homeland Security Investigations launched Project Red Hook in December 2023 to target it; the FTC fined Walmart $10 million in 2024 over its handling of gift-card scams.
HOW IT WORKS
Overseas scammers (government impersonation, tech support, romance) direct victims to buy gift cards and read out the codes, or crews steal cards from racks, record the numbers, reseal and return them, then drain them when activated. Codes are sold on Chinese-language chat groups to US-based cells, whose runners spend them within hours at Target, Apple or Walmart on high-value electronics. The goods are consolidated, reshipped to China or resold through online marketplaces, and the proceeds move back through underground banking.
Gift card packaging that has been opened, resealed or has a replaced barcode stickerAnyone asking to be paid in gift cards or to read out card codesShopper buying several iPhones with many gift cards in one visitJob offer to receive parcels at home and forward them abroadCard balance already zero when first checked after purchase
HOW USEFUL IT IS TO CRIMINALS
Requires a runner with a phone and a WeChat group; cards are spent within hours of a victim reading out the code, before banks or retailers can freeze them. The FTC logged $212 million in gift-card scam losses in 2024, while HSI's 83 arrests are almost all of low-level couriers and runners, not organisers in China.
THE DAMAGE IT HAS CAUSED
$212 million
US gift-card and prepaid-card scam losses reported to the FTC, 2024 — FTC via AARP
The FTC recorded $212 million in gift-card scam losses in 2024, and HSI says draining by Chinese groups causes losses 'in the hundreds of millions'; no body publishes a reshipping-only total. The largest prosecuted cells handled $2.5 million (Los Angeles) and $4.8 million (New Hampshire). Elderly scam victims, whose cards feed the pipeline, are the ultimate losers.
$212 million Losses from 41,000+ US gift-card and prepaid-card scam reports in 2024 (FTC via AARP)
83 Arrests for gift-card tampering and draining under HSI's Project Red Hook since Dec 2023 (ICE/HSI, 2025)
6,100 Unauthorised gift cards found on one courier, Liao Donghui (ICE; Security Boulevard, Aug 2025)
WHO USES IT MOST
MOST OF ALL: 🇨🇳 China ▸
HSI's Project Red Hook attributes the tampering and reshipping pipeline to Chinese organised crime groups, with 83 arrests since December 2023, and the electronics bought with the cards are shipped to China (ICE/HSI; ProPublica).
China (organised crime groups, destination for goods)United States (victims, retail purchases, runner cells)Malaysia (money movement)
GOVERNMENTS LINKED TO IT
No government is documented as using this method.
NOTABLE PEOPLE WHO USED IT — RANKED BY PROFILE ORDER (NOT BY AMOUNT)
#1 Blade Bai, Bowen Hu and Tairan Shi CONVICTEDREPORT PENDING
More than $2.5M in gift cards · 2019-2020
Los Angeles County cell that used WeChat to distribute Target gift cards bought by telephone-scam victims to runners who spent them on electronics and more cards; sentenced to 15, 10 and 8 years.
SOURCE: US Attorney C.D. Cal.; KTLA; SSA OIG, Sept 2023
#2 Naxin Wu, Mengying Jiang and Mingdong Chen CONVICTED (PLEADED GUILTY)REPORT PENDING
$4.8M in fraudulent gift cards ($3M Jiang, $1.4M Wu, $400K Chen) · 2020s
Chinese nationals operating a New Hampshire cell that bought discounted fraudulent gift cards and used them to buy Apple products for shipment overseas; pleaded guilty to wire-fraud conspiracy in January 2025.
SOURCE: ICE/HSI news release, 2025
#3 Liao Donghui CONVICTEDREPORT PENDING
About $1.9M loss to consumers and retailers · 2024
Chinese national sentenced to 33 months in Florida after pleading guilty to possessing more than 6,100 unauthorised gift cards in a draining scheme.
SOURCE: Security Boulevard, 'Project Red Hook: Chinese Gift Card Fraud at Scale', Aug 2025; ICE
SOURCES
ICE/HSI, 'Tackling the Rise in Gift Card Fraud' (Project Red Hook)
ICE/HSI, 'HSI investigation leads to guilty pleas for Chinese nationals in fraudulent gift card conspiracy', 2025
Security Boulevard, 'Project Red Hook: Chinese Gift Card Fraud at Scale', Aug 2025
ProPublica, 'Chinese organized crime, gift cards and American retail'
KTLA, '3 L.A. County residents sentenced for laundering over $2.5 million in Target gift cards'
FTC gift-card scam data via AARP, 2024
Forbes, 'Gift Card Draining: How Organized Crime Steals Millions From Shoppers', 8 Jun 2026