Gift Card Draining Scam Hits Australian Supermarkets

A sophisticated gift card fraud operation is targeting Australian supermarkets, with tampered cards discovered on shelves at Coles and Woolworths stores across the country's capital cities — and investigators warn a well-organised syndicate may be behind it.

The scam, known as "card draining", involves criminals removing gift cards from store displays, copying or scratching out redemption codes, then returning the cards to shelves. The stolen codes become active only when an unsuspecting shopper pays for the card at the register, at which point the criminals immediately redeem the funds before the buyer can use them.

Sydney resident Lovekesh Arora fell victim to the scheme after purchasing $2,000 worth of Apple gift cards at Coles, where a promotion was offering 10 per cent back in Flybuys points. When he opened two of the cards at home, the redemption codes had been scratched away entirely. He was left unable to buy the laptop he intended and spent weeks pursuing refunds through the store and Apple directly — eventually receiving $700 in credit.

An ABC News investigation mapped a cluster of reports from shoppers who purchased suspicious cards at Melbourne supermarkets during May and June this year, with similar incidents reported at stores in other major cities. Private investigator Ken Gamble, who reviewed the data, said the geographic pattern pointed to organised crime. "It would probably be an organised syndicate," he said, noting the concentration in capital cities suggested deliberate coordination.

The fraud is far from a local problem. In the United States, Homeland Security launched "Project Red Hook" specifically to address a surge in gift card tampering complaints from retailers. The operation has so far led to 250 arrests and uncovered links to money laundering in China, human trafficking, and even murder. Investigators found the crime is divided into layers — separate groups handle stealing cards from shelves, tampering with them, and returning them — making prosecutions complex.

The ABC revealed that Coles cooperated with New South Wales Police last year to identify a man from Taiwan allegedly returning tampered cards to shelves across at least five Sydney stores. He was suspected of working as part of a broader network.

Despite the scale of the issue, both the Australian Federal Police and financial intelligence agency AUSTRAC said gift card fraud falls outside their remit. Ken Gamble cautioned that without a coordinated enforcement response, the crime could become significantly more widespread. "Unless they join all the dots and see this is done in great volume, you're not going to get law enforcement to put the resources in," he said.

The Australian gift card industry is estimated to be worth nearly $21 billion annually. The Australian Gift and Prepaid Card Association declined to be interviewed, as did its two largest distributors. One industry figure acknowledged that consumer confidence was a key reason the sector tended not to publicise the problem publicly.

Apple changed its gift card packaging in early 2024 to make tampering more difficult, though critics say more needs to be done. Coles described the issue as an "evolving challenge" it takes seriously, while Woolworths said tampering affects a small proportion of cards and is a shared retail industry problem. Arora's message to retailers is straightforward: "What would work for every customer is if the packaging was improved and made even more tamper-proof."