Walmart Faces Allegations of Facilitating Multi-Billion Dollar Fraud Network

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A detailed investigation by ProPublica has uncovered Walmart’s involvement as a significant facilitator in a sprawling fraud network, leading to billions of dollars in losses for consumers. The report highlights instances of money laundering and fraud, with one case involving a retired teacher, Christy Browne, who unwittingly purchased $2,000 in Walmart gift cards, believing she was assisting an FBI investigation into money laundering.

The orchestrator of this extensive laundering scheme, Qinbin Chen, a Chinese national based in Virginia, managed to launder around $7 million in fraudulently obtained gift cards, victimizing hundreds in the U.S. and China. Termed “The Walmart scheme,” it exemplifies Walmart’s troubled history as a hub for fraud, contributing to over $1 billion in fraud losses from 2013 to 2022, according to the Federal Trade Commission (FTC).

Walmart’s financial services, particularly gift cards and electronic money transfers, have been consistently exploited by scammers, attributed to the company’s alleged lack of rigorous employee training and failure to implement anti-fraud measures, as per ProPublica’s findings.

In 2022, the FTC filed a lawsuit against Walmart, accusing the company of disregarding criminal usage of its financial systems. Despite being aware of its services being exploited, Walmart aims to dismiss the lawsuit, asserting no responsibility for guarding against the criminal conduct of third parties.

While acknowledging the unfortunate prevalence of fraud, Walmart contends that consumers can reasonably avoid such schemes. The company also challenges the FTC’s authority in initiating the action.

Qinbin Chen, involved in laundering Walmart gift cards for five years, was found guilty on all eight charges in a recent trial. His sentencing is scheduled for February, with potential imprisonment ranging from two to 20 years.

Despite these legal challenges, Walmart continues to expand its financial services, acquiring the online banking platform One in 2022. However, concerns linger regarding the company’s ability to effectively manage these services, given its history of compliance issues and apparent reluctance to address fraud within its systems. This development is not only impacting Walmart but also influencing related stocks like Amazon.com Inc. (AMZN), Target Corporation (TGT), and ETFs such as Consumer Discretionary Select Sector SPDR Fund (XLY) and Vanguard Consumer Discretionary ETF (VCR).