An in-depth investigation by ProPublica says so Walmart Inc. (NYSE: WMT) is a major player in a vast network of fraud involving gift cards and money laundering.
One notable case involved Christy Browne, a retired teacher from New York, who was tricked into buying $2,000 in Walmart gift cards in February 2020.
He was led to believe he was assisting an FBI money laundering investigation. The agency said those cards were, in fact, funneled into an elaborate laundering scheme orchestrated by Chinbin ChenChinese national based in Virginia.
Chen’s operation, responsible for laundering approximately $7 million in fraudulent gift cards, expanded throughout the US and China, victimizing hundreds.
This scheme, called “The Walmart scheme,” highlights Walmart’s history as a fraud hotspot. Despite commitments to regulators and enforcement efforts, Walmart was a conduit for more than $1 billion in fraud losses from 2013 to 2022, per Federal Trade Commission (FTC).
Walmart’s financial services, especially gift cards and online money transfers, are constantly being exploited by fraudsters.
The company’s lack of rigorous employee training and failure to implement anti-fraud measures have contributed significantly to these losses, according to ProPublica.
In 2022, the FTC filed a lawsuit against Walmart, alleging that the company “turned a blind eye” to criminals using its financial systems.
Also Read: Walmart Up: Market Analysts Reveal Bright Outlook Despite Economic Headwinds
“Walmart knew that its services were being used by fraudsters and that the company had been repeatedly warned about certain stores where ‘twenty-five, fifty or even seventy-five percent of the money transfer activity was fraudulent,'” a federal judge wrote in the case. an order.
The company aims to have the lawsuit dismissed, citing, in part, that it bears “no responsibility to protect against the criminal conduct of third parties.”
Despite acknowledging the unfortunate nature of the fraud, Walmart argued that such schemes are “reasonably avoidable by consumers.”
Additionally, the company claims the FTC is exceeding its authority in bringing the action.
According to ProPublica, Chen was involved in laundering Walmart gift cards for five years until his arrest in 2021. On September 14, the jury reached a verdict in less than three hours, finding Chen guilty of all eight charges. His sentencing is scheduled for February and he could face two to 20 years in prison.
Despite these challenges, Walmart is expanding its financial services. In 2022 it acquired the online banking platform A.
However, concerns remain about Walmart’s ability to effectively manage these services, given its history of compliance issues and reluctance to address fraud in its systems.
This development not only affects Walmart but also affects related stocks such as e.g Amazon.com Inc. AMZN and Target Corporation TGTalong with ETFs like Consumer Discretionary SPDR Fund XLY and Vanguard Consumer Discretionary ETF VCR.
Now Read: Elon Musk Claims Ozempic Affected Walmart Sales And Appears To Endorse Drugs
This content was created in part with the help of artificial intelligence tools and was reviewed and published by Benzinga editors.
Photo: Shutterstock
