Amazon and other retailers hit by refund fraud costing them billions

Just before midnight on May 4, 2023, police were called to an Amazon warehouse in Chattanooga, Tennessee, to investigate a reported theft. 

They were met by a loss prevention employee, who directed them to a warehouse worker named Noah Page, the suspected culprit, according to a police report of the incident that was obtained by CNBC.

When confronted by police, according to the report, Page admitted that he’d marked a customer’s order in Amazon’s internal system as returned even though the products were never actually sent back to the company. Page received $3,500 for his part in the scheme, the report said.

Page didn’t know the customer but had chosen to call him “Ralph,” the report said. Ralph, it turned out, was part of a group named Rekk, an expansive refund fraud organization that targeted major retailers and recruited company employees by promising them a cut of the profits, Amazon alleged in a lawsuit.

Refund fraud, which involves tricking retailers into refunding a customer for a purchase without an item being physically returned, has become so pervasive that groups now market their services on Reddit, TikTok and Telegram. Type in “refund method” — or “r3fund,” to skirt content moderators — on TikTok and videos will pop up of users showing off piles of cash, sneakers and iPhones. One video has the caption, “me after realizing you can get a refund on any Rick Owens if the ‘package never came,'” referring to the minimalist fashion brand. The clip shows a hand endlessly tossing shoes to the ground.

Fraud groups are taking advantage of retailers’ lenient return policies, experts told CNBC, which often include unlimited free returns and sometimes even a preference that customers keep the items. It’s ballooned into a massive problem for retailers, costing them more than $101 billion last year, according to a survey by the National Retail Federation and Appriss Retail. The figure includes multiple forms of fraud, such as sending back clothing after it’s been worn, known as “wardrobing,” and returning shoplifted merchandise, the survey said.

In December, Amazon filed a lawsuit against Page and 47 other people across the globe with alleged ties to Rekk, accusing them of conspiring to steal millions of dollars worth of products in a refund fraud operation. Amazon described these services as “illegitimate ‘businesses'” that look to…