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Refund fraud schemes promoted on TikTok, Telegram are costing Amazon and other retailers billions of dollars

On May 4, 2023, police responded to a reported theft at an Amazon warehouse in Chattanooga, Tennessee, shortly before midnight.  

They were greeted by a loss prevention employee who referred them to a warehouse worker named Noah Page, the alleged perpetrator, according to a police report acquired by CNBC.  

When confronted by authorities, Page confirmed, according to the report, that he recorded a customer’s order as returned in Amazon’s internal system despite the fact that the products were never returned to the company. Page received $3,500 for his participation in the fraud, according to the investigation

Page didn’t know the customer but chose to call him “Ralph,” according to the investigation. Ralph was discovered to be a member of Rekk, a large refund fraud organization that targeted major retailers and recruited corporate employees by providing a portion of the earnings, according to Amazon’s lawsuit

Refund fraud, which involves fooling merchants into refunding a consumer for a purchase without physically returning the goods, has become so widespread that gangs now advertise their services on Reddit, TikTok, and Telegram. On TikTok, search for “refund method” — or “r3fund,” to avoid content reviewers — and videos of users flaunting heaps of cash, footwear, and iPhones will appear. One video’s description reads, “me after realizing you can get a refund on any Rick Owens if the ‘package never came,'” alluding to the minimalist fashion label. The video shows a hand repeatedly flinging shoes on the ground.  

Experts told CNBC that fraud groups are taking advantage of shops’ permissive return policies, which sometimes allow unlimited free returns and, in some cases, a preference for shoppers to keep the things. It has grown into a big problem for retailers, costing them more than $101 billion last year, according to a survey conducted by the National Retail Federation and Appriss Retail. According to the report, the figure encompasses a variety of types of fraud, including “wardrobing,” which is the practice of returning garments after it has been used, and returning shoplifted products.  

Amazon launched a complaint in December against Page and 47 other people worldwide with claimed ties to Rekk, accusing them of scheming to steal millions of dollars in refund fraud. Amazon referred to these sites as “illegitimate ‘businesses'” that are attempting to “exploit the refund process for their own financial gain to the detriment of honest consumers and retailers who must bear the brunt of increased costs, decreased inventory, and service disruption that impacts genuine customers.”  

Amazon also lost more than $700,000 to another alleged fraud network in which ten people were indicted last year, according to documents from a 2023 lawsuit. 

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