Santa Rosa police last month arrested two men and confiscated more than 25,000 compromised gift cards related to a fraud operation potentially spanning hundreds of CVS locations in California, police said.
The arrests occurred on Aug. 7, after automated license plate readers in Sonoma County captured the plate of a vehicle associated with prior fraud incidents, Sgt. Patricia Seffens said in a news release.
On Aug. 1, the department received an advisory of that same vehicle’s possible connection to a crime known as “gift card draining.” In this operation, scammers record or alter the activation information for legitimate gift cards, then re-seal them. When someone buys one of the tampered gift cards, the scammers access the funds when it is activated, draining the card of its value. The account number or PINs are also often damaged.
After receiving the tip, real time crime center analysts tracked the vehicle as it stopped at CVS stores in Rohnert Park, Petaluma, Sebastopol and Santa Rosa, including the location at 2700 Yulupa Avenue. An undercover sergeant followed one of the passengers, later identified as 29-year-old Yongsheng Zhao, into the Santa Rosa store and saw him manipulating gift cards while hiding another large stack of cards in his possession, Seffens said.
An officer, working in communication with detectives, pulled over the vehicle near Bennett Valley Road and Warm Springs Road in Glen Ellen.
Zhao, of El Monte, and Zhipeng Li, 33, of Monterey Park, were detained. Police searched the vehicle and found 10,000 gift cards bundled and identified by store location, about $7,000 cash, and ledgers documenting an operation involving more than 200 CVS stores. The gift cards were for stores such as The Home Depot, Macy’s and Bath & Body Works.
Detectives later discovered compromised gift cards at other locations Zhao and Li visited that day. About a week later, police found 15,000 more gift cards in a hotel room the two men rented in Hayward.
Zhao and Li were booked into the Sonoma County jail on suspicion of six felony charges, including burglary, grand theft, theft and forgery of access card information, forgery and conspiracy. On Aug. 8, they were both charged in Sonoma County Superior court with all six counts.
Zhao and Li were initially booked under an enhanced bail of $100,000.
As of Tuesday afternoon, Li remains in custody and is set to appear Oct. 3 in court. Zhao was initially released on bail, but violated the agreement, according to court records. A warrant for his arrest was issued Sept. 5.
Santa Rosa police continue to work with other state and federal agencies to investigate the extent of the gift card scam. The Petaluma and Sebastopol police departments and CVS asset protection and corporate investigators assisted in the case.
Since the arrests, investigators have worked with retailers to identify and remove damaged gift cards from shelves.
Some indicators that a card has been tampered with include visible tears around the edge of the secure pack, paper fibers sticking out around the border that indicate a knife cut the side, knicks on the pull tab, brand logos or colors that seem slightly off, a balance that does not match what was spent or a PIN cover that is wrinkled, compromised or doesn’t match typical packaging.
Anyone who believes they have been a victim of gift card fraud should report it to their local law enforcement agency, Seffens said.