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Amazon Unearths Refund Scam Facilitated by its own Employees; Here's how They did it

The lawsuit, filed in the U.S. District Court in Seattle, sheds light on a sophisticated scheme that exploited the retailer's returns system over nearly a year, between June 2022 and May 2023
UPDATED JAN 22, 2024
Cover Image Source: Amazon | Getty Images
Cover Image Source: Amazon | Getty Images

Getting easy refunds for flawed products is one of the perks that adds convenience to the overall consumer experience on e-commerce platforms. But turns out some con artists are exploiting this essential service to run scams in cahoots with employees of such platforms. In a shocking revelation, e-tailer giant Amazon has filed a lawsuit against an alleged international fraud organization known as REKK, and has accused seven former employees and accomplices of orchestrating a systematic refund abuse that cost the firm a staggering $500,000. The lawsuit, filed in the U.S. District Court in Seattle, sheds light on a sophisticated scheme that exploited the retailer's returns system over nearly a year, between June 2022 and May 2023.

Amazon mentioned in detail how REKK executed its fraudulent scheme by ordering products through Amazon's marketplace, charging a fee, and then manipulating the system to obtain refunds without actually returning the items. One example cited in the lawsuit involves the ordering of five iPads, with a REKK member allegedly collaborating with an Amazon fulfillment employee to falsely register the iPads as returned, triggering refunds. REKK received the refunded amount, but also kept the iPads, according to the legal filing.

Source: GettyImages | David McNew  Stringer
Source: GettyImages | David McNew Stringer

Another instance involved the impersonation of an Amazon customer ordering two MacBook Air laptops. REKK allegedly falsified a police report, claiming that the products were never delivered, and then received refunds as part of the fraudulent act. The lawsuit asserts that REKK recruited Amazon employees through platforms like Reddit, LinkedIn, and Telegram, using these channels to advertise its illicit services.

The legal document specifically names seven former Amazon employees, accusing them of aiding and abetting the fraudulent returns. Notably, REKK recruited an employee from a Chattanooga fulfillment center, Janiyah Alford, who approved fraudulent returns in exchange for payment. Amazon accuses Alford of approving 76 fraudulent returns, resulting in over $100,000 in refunds to REKK members. Alford claims that she felt threatened to participate, as the messages from REKK included her home address and those of her family members.

Image Source: Pexels | Sora Shimazaki
Image Source: Pexels | Sora Shimazaki

Noah Page, another former employee at the Chattanooga center, is accused of approving 56 fraudulent returns, costing over $75,000 in refunds to REKK. Amazon, which invests over a billion dollars annually in combating fraud, uncovered the scheme through an investigator who posed as a customer and interacted with REKK through Telegram.

Return fraud is not a new challenge for Amazon, but this case reveals the true extent to which scammers have penetrated the system. Eleanor Ritchie, product manager of return abuse solutions at fraud prevention vendor Signifyd, notes that fraudulent returns constitute 8%-10% of total returns in online retail, with an estimated $20 billion of the $200 billion in online returns in 2022 being fraudulent. Ritchie suggests that the REKK case might not be isolated, indicating a broader problem that retailers, especially e-commerce giants like Amazon, need to address.

As retailers face the growing threat of return fraud impacting their bottom lines, it is likely that they will increasingly invest in monitoring returns more closely. Rather than tightening return policies across the board, experts predict the use of machine learning and other AI tools to intelligently track returns and identify potential fraud, so that customer satisfaction isn't affected while preventing fraud.