China gangs exploit US gift cards to move stolen cash, DHS says

Myles Miller, Bloomberg News on Oct 18, 2025

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Gift cards, one of the most basic financial products in the U.S. retail market, have become the backbone of a billion-dollar criminal economy that investigators say is moving American money into China.

Homeland Security Investigations agents say Chinese organized-crime groups have built a laundering network that uses U.S. retailers, mobile wallets and cryptocurrency to steal and export wealth. Operatives inside the U.S. drain compromised gift cards, buy high-value goods such as iPhones and laptops, and ship them to China, where they are resold for profit.

The proceeds are then converted into digital currency and funneled through Chinese payment platforms, creating what investigators describe as a hidden pipeline of American capital leaving the country.

“The end goal is to cash out stolen money from fraud or other criminal activity,” said Adam Parks, an assistant special agent in charge with Homeland Security Investigations. “When you’re talking about China, the trade relationship gives them the perfect exit.”

The DHS operation, known as Project Red Hook, has exposed a web of China-based organizations using stolen card data and digital wallets to turn everyday U.S. consumer spending into a revenue stream. Parks said the agency has identified more than $1 billion in fraud losses over the past two years tied to the same groups.

Criminals purchase stolen card numbers in bulk through Tencent Holdings Ltd.’s WeChat app, pay for them with cryptocurrency and load the balances onto mobile wallets. Teams in the U.S. use those wallets to buy electronics and other high-demand products that can be sold for two or three times their value in China.

“The system operates with the efficiency of a supply chain,” said Dariush Vollenweider, a senior Homeland Security agent who helps oversee the investigation. “You have the takers, the tampers, the placers, the redeemers, the supporters. By the time a consumer loads money onto a card, that balance is already gone.”

Investigators say the same networks also operate large-scale text-message scams that feed the card-draining operations. Messages posing as highway-toll, postal-fee or delivery notices direct recipients to fake payment sites. Victims who enter their information supply the data used to steal funds.

Parks said criminals in China monitor the spoofed sites in real time, load victims’ card details into mobile wallets and make purchases in the U.S. through phones they control. Investigators also have identified what are known as SIM farms — rooms filled with devices that can send thousands of text messages at once by cycling through mobile phone SIM cards.

The setups are used to blast phishing messages in bulk, including some operated from within the U.S.

In September, federal agents dismantled a covert network near the United Nations in New York that contained more than 300 SIM servers and 100,000 SIM cards, according to the Secret Service. At first, investigators were worried the equipment was connected to a possible threat against President Donald Trump, who was headed to New York to speak at the U.N., but they were later tied to the longstanding financial scheme.

Homeland Security officials say the economic motive reaches back decades. China’s restrictions on foreign currency and luxury imports fostered a gray market known as daigou, or “buying on behalf of,” in which overseas buyers purchased goods that were scarce or heavily taxed at home. The Treasury Department in an August report identified about $9.6 million in such suspicious transactions, with the buyers in the U.S. using cash from laundering networks.

The scale of the problem is increasingly visible. Santa Rosa police arrested two men from Southern California after finding 10,000 tampered gift cards in their car and 15,000 more in a Hayward hotel room. Investigators said the suspects had visited more than 200 CVS stores, removing cards from racks, copying activation data and resealing them before putting them back.

In New Hampshire, three Chinese nationals were sentenced to two to five years in federal prison for conspiracy to commit wire fraud after agents found a warehouse stacked with Apple products bought with stolen electronic gift cards. In Florida, another Chinese national was sentenced to 33 months in federal prison for possession of unauthorized access devices after agents found more than 6,000 altered gift cards tied to a nationwide retail fraud scheme.

For financial institutions and retailers, the threat lies in how ordinary it looks. Gift cards sit beside cash registers. Transactions flow through familiar processors. Losses are scattered across thousands of small purchases, often unnoticed until patterns emerge.

“It looks small until you add it up,” Vollenweider said. “Every time someone loads money onto a compromised card, a piece of that money leaves the country. Multiply that by millions of transactions and you start to see what we’re dealing with.”