Gift Card Fraud / Draining

First reported at scale in the United States in 2018, when the FTC named gift cards the top payment method demanded by scammers; retail 'draining' crews were first prosecuted in US federal courts in the early 2020s.

Gift cards became a scam payment method as soon as they were sold in supermarkets: the FTC first flagged them as the top payment demanded by phone scammers in 2018 and reported $148 million taken in the first nine months of 2021 alone. 'Draining' is the retail-side variant, first documented by US police and retailers in the late 2010s: organised crews steal blank cards from racks, record the numbers and PINs, reseal and return them, then wait for a shopper to load money and empty the balance within minutes. US Homeland Security Investigations' 'Project Red Hook' (launched 2023) attributes much of it to Chinese organised crime groups that move the proceeds into Apple products shipped to China and Hong Kong.

Two versions. In payment scams, a caller posing as the tax office, a utility, tech support or a grandchild tells the victim to buy gift cards and read out the codes; the value is spent or resold within minutes. In draining, crews tamper with cards on store racks (opening packaging, photographing numbers, replacing scratch panels or barcodes) and put them back; when a customer activates the card at the till, software alerts the crew, who spend the balance online before the buyer does. Proceeds are laundered by buying iPhones and other electronics for export.

Very cheap to run: a phone script or a few minutes at a store rack, no hacking skill needed, and card balances are irreversible and instantly resold. The FTC says gift cards were the most reported payment method for imposter scams for several years, yet only a handful of draining crews have been prosecuted, mostly in HSI's Project Red Hook cases.

The FTC recorded $217 million in reported gift-card scam losses in 2023 and $228 million in 2022, figures it says are heavily under-reported. The largest prosecuted network, broken up in New Hampshire in 2025, handled more than $100 million in stolen card data. Victims are often elderly people who lose savings in a single afternoon, and stores pull products or lock cabinets in response.