Santa Rosa Police Arrest Two Men In A Gift Card Scheme Operating Across California

SONOMA COUNTY, CA — Santa Rosa police arrested two Southern California men that police say are linked to an international criminal network operating a fraud scheme known as “gift card draining."

Police suspect the men of removing legitimate gift cards from retail displays, recording or altering the activation data, then resealing them in their original packaging before returning them to the displays.

Santa Rosa investigators arrested Yongsheng Zhao, 29, of El Monte, and Zhipeng Li, 33, of Monterey Park, on Aug. 7.

Police said they recovered about 25,000 compromised gift cards along with ledgers and $7000 in cash from the men's car in what they described as possibly one of the largest seizures of its kind in California involving police from Petaluma and Sebastopol.

Police spotted the men stopping at multiple CVS stores in Sonoma County on Aug. 7.

A sergeant followed Zhao into a Santa Rosa CVS and witnessed him handling gift cards on store shelves and concealing a large stack of others, according to police.

Zhao and Li then drove to Glen Ellen, where Santa Rosa police arrested them.

Investigators discovered compromised gift cards from CVS stores in Petaluma, Rohnert Park, Sebastopol, and Santa Rosa that the men visited, police said.

Police found $7000 in cash and about 10,000 gift cards, bundled and coded by store location. They also found notes and ledgers documenting an operation spanning more than 200 CVS locations in California.

A week later, detectives found nine "bankers boxes" containing about 15,000 gift cards in a Hayward hotel room rented by the men.

Zhao and Li were arrested and face charges of theft and forgery of access card information, burglary, grand theft, forgery, and conspiracy. They were booked into the Sonoma County Main Adult Detention Facility. Their bail was set at $100,000 each.

Li remained was still in custody on Aug. 9. Zhao was released on bail.

Gift card draining

"Gift card draining" is a widespread, highly lucrative crime that can have severe consequences for victims, according to authorities.

The gift card — typically loaded with $25 to $500 — is drained moments after the buyer activates it.

In many cases, the card’s account number or PIN has been damaged or defaced, preventing the buyer from accessing the funds.

Recipients seldom report the loss to the retailer or the person who gifted them the card.

However, losses associated with this type of fraud can amount to hundreds of millions of dollars nationwide each year, according to police, underscoring the scale of the issue and its impact on victims.

Santa Rosa police said they and state and federal law enforcement are still trying to trace the full scope of the scam.

How to spot tampering

Residents on the Santa Rosa Police Department Facebook page shared their stories of buying "drained" gift cards.

For example, one person bought a gift card from Home Depot. When they tried to redeem the valuethey found the value was empty.

Often traces of tampering are only noticeable after the packing is opened and the pin number underneath the metallic screen is visible.

The case highlights the sophistication of modern organized crime groups and the financial impact on victims, police said.

It also highlights the need for shoppers to buy gift cards from reputable retailers that keep gift cards near the registers or behind check-out counters, which is where police encourage retailers to keep them.

Cards should be carefully inspected for signs of tampering before buying.

Anyone who is a victim of gift card draining should report it to the retailer and notify local law enforcement, Santa Rosa Police Sgt. Patricia Seffens said.

Retailers can improve the way they handle gift cards to prevent fraud.

And local law enforcement agencies can target operations like the one that led to the Aug. 7 arrest.

Read more about how to stop and prevent gift card tampering.