The U.S. Department of Homeland Security Investigations (HSI) recently confirmed that an organized crime group in China is building a massive money laundering network through U.S. retail gift cards, mobile wallets, and cryptocurrencies, transferring illicit funds back to China, with the scale potentially reaching billions of dollars.
According to Bloomberg, the investigation named “Project Red Hook” revealed that the Chinese criminal network is purchasing, stealing, and reselling U.S. retail gift cards to convert illicit proceeds into electronic currencies, then transferring them out of the country through Chinese payment platforms, creating a covert and efficient “capital export conduit.”
Assistant Special Agent Adam Parks from HSI stated in an interview that the ultimate goal of these groups is to “convert fraud and other criminal proceeds into freely moving funds.” He added, “For China, the vast trade and payment systems provide a perfect export channel.”
Investigators indicated that this criminal network is well-organized both inside and outside China, forming a complete industry chain. The groups in China purchase stolen credit card information through WeChat using cryptocurrencies and load balances into mobile wallets. Operators in the U.S. then use these accounts to purchase high-value electronic products like Apple devices and laptops, which are shipped back to China for resale.
Senior Agent Dariush Vollenweider described the operation as “precise, functioning like a supply chain. When consumers top up gift cards, a portion of the funds may have already been siphoned off.”
Law enforcement officials highlighted the dangers of gift card fraud due to its seemingly ordinary nature. Gift cards are widely displayed in retail stores and transactions occur through familiar payment channels, with losses dispersed among thousands of small transactions, making them difficult to detect or track.
Vollenweider mentioned, “Each time someone reloads a compromised card, some funds may flow overseas. When such transactions accumulate millions of times, the scale becomes astounding.”
HSI also warned that these money laundering networks often collaborate with telecommunication scam activities. Criminals engage in large-scale smishing scams, impersonating postal, toll road, or courier companies to lure victims into entering credit card information on phishing websites. Stolen data is then loaded into electronic wallets for immediate consumption by criminal groups within the U.S.
Officials pointed out that some criminal groups set up “SIM card farms” abroad, using hundreds or thousands of SIM cards to send scam messages, creating an industrialized operation chain.
Last month, the U.S. Secret Service discovered a dark web operating center near the United Nations Headquarters in New York, which included over 300 SIM servers and 100,000 SIM cards. Initially suspected to be a security threat related to President Donald Trump’s attendance at the UN General Assembly, it was later confirmed to be part of a financial fraud network.
Law enforcement officials noted that such activities can be traced back to China’s longstanding “daigou” gray market. Due to strict restrictions on foreign exchange and luxury goods imports in China, overseas purchasing has evolved into a money laundering channel.
A report by the U.S. Department of the Treasury in August estimated that around $9.6 million in suspicious transactions involved daigou networks, with funds originating from money laundering groups operating in the U.S.
Cases have emerged in multiple states. The Santa Rosa Police Department in California arrested two Southern California men, seizing over 25,000 altered gift cards from their car and hotel rooms. Three Chinese nationals in New Hampshire were sentenced to federal imprisonment for two to five years for using stolen electronic gift cards to purchase Apple products. Another Chinese citizen in Florida received a 33-month sentence for possessing over 6,000 illegal gift cards.
The Department of Homeland Security continues to investigate this cross-border criminal chain and urges financial institutions and retailers to enhance monitoring to prevent American consumers’ daily spending from becoming the “fuel” for international money laundering.