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“I didn’t want to pull them off a rack,” he said. “I thought scammers would put their own codes on the back.”Ìý

Initially, the store managerÌýwas dubious. “They thought I was the scammer,” Romano, said with a laugh.Ìý

The 73-year-old explained that his Knights of Columbus St. Clare of Assisi Council 13630, of which he is ‘grand knight,’ raises tens of thousands of dollars annually for charities in York Region and Toronto.

In the past, they’ve donated food, toys and other products, but last Christmas some charities requested gift cards they could share with the people they help.

After Romano provided ID, the Walmart manager opened a drawer “with a lot of cards in them,” he said.Ìý“They started scanning them, ringing it up, and then I paid.”

Shortly after delivering the cards to Yellow Brick House, a Richmond Hill shelter for abused women and their children, a manager emailed Romano with bad news.

The shelter told the Star it always verifies balances on gift cards before distributing them to ensure the women don’t find themselves in an embarrassing situation at checkout.

Seven of the 20 cards, each valued at $50, had a zero balance.Ìý

“How is that even possible?” thought a shocked Romano.

The Retail Council of Canada (RCC) says Canadians lost nearly $4 million in 2021 to giftÌýcard fraud, though the number is likely muchÌýhigher since many consumers don’t report problems.

In the U.S., the numbers are even more staggering, with gift card fraud losses running into the billions, according to federal investigators.

In January, three Chinese nationalsÌýpleaded guilty in New Hampshire for their roles in siphoning nearly $5 million from gift cards.Ìý

The U.S. Department of Homeland Security has assigned a special task force dubbed ‘Project Red Hook’ to deal with increasing complaints of “card draining,” which has resulted in 160 arrests to date.

The illicit funds were used to back fentanyl production and human trafficking through a criminal network in the U.S. and Canada.

After the Star shared Denni Wong’s story of his gift card refund disappearing, dozens of others reached out to the Star to share similar experiences.Ìý

Romano wanted to understand how $350 could just vanish.

He picked up the seven drained cards from Yellow Brick House, receipt in hand, and drove right back to Walmart on Applewood Crescent.Ìý

“Remember me?” he says he asked the manager. She took the cards and assured him the store would investigate. That was four months ago.Ìý

Earlier this week, a store manager told the Star “a huge fraud happened at Christmastime” involving gift cards, echoing a sentiment Romano says he was told last December. She said she created a “ticket” for Romano and passed it on to “home office” and that it was looking into the situation. She said she “escalated” Romano’s case.Ìý

Walmart Canada has not yet responded to the Star’s request for comment. Neither has the RCMP. I wanted to know if it was conducting its own investigation of mass gift card fraud or following up on Project Red Hook’s findings.Ìý

But Kevin Gosschalk, a software developer who has been helping retailers fight gift card fraud for the past six years, thinks he knows what happened to the gift cards donated to Yellow Brick House.

The problem isn’t confined to one store or type of card but applies to all of them, everywhere.

“The moment you activate a gift card, it’s at risk of being compromised, immediately,” says Gosschalk, president and CEO of Arkose Labs, which produces software that safeguards e-commerce platforms. Clients include Roblox, Microsoft and Sony.

“Gift card fraud is incredibly lucrative,” Gosschalk said. Fraudsters can buy “purpose-built software to brute force different combinations of gift card numbers. They’ve got a bot that’s automatically testing thousands and thousands and thousands of different combinations until they find valid ones. And basically, what they’re looking for are cards that have been activated but not spent.”Ìý

Every card carries a different combination of digits.

“That attacker basically had a 30 per cent success rate,” Gosschalk said of the cards Romano purchased. “So if they took longer to spend them, more of those cards would have been compromised.”

Retail analyst Bruce Winder, who has worked for Canadian Tire and Zellers, says “criminals love gift cards” because they’re “easy to steal, anonymous and untraceable. Organized retail crime is a big issue for retailers now.”

So how can consumers protect themselves?

pc28¹ÙÍøPolice Det. David Coffey of the financial crimes unit told the Star that consumers can notify police but likely won’t get their money back.

“We investigate any fraud that is reported,” he said. “Having said that, most often the only way people will have their lost funds returned, is through the merchant on the card in which case the merchant is the complainant.”

Winder, for one, doesn’t buy gift cards but advises anyone who does to use the entire balance immediately, which he acknowledges is not what most people do.

Apart from never providing your gift card number or pin to anyone by phone or email, Gosschalk says there is little consumers can do.

“I think every other form of defence against kind of gift card scams is really more going to be reliant on retailers doing the right thing versus something consumers can easily identify,” he said.

Some retailers have started providing consumers with a second security number in addition to the one shown on the card.Ìý

“The receipt has a different number and you actually need to put them together to be able to check the balance,” Gosschalk explained. “But pre-existing gift cards don’t get those. So they have to sell through their entire inventory before the more modern ones are used.”

Romano said the Knights of Columbus group quickly obtained a set of new gift cards from No Frills to give to Yellow Brick House, but he’s not giving up hope for a refund from Walmart.

“It’s $350, it may seem like nothing to people, even to me. But this is charitable money. It’s money that people entrusted us with to give to those that need it. We can’t forget.”

On Thursday, Romano emailed me with an update.Ìý

“The issue has been resolved,” he wrote.Ìý“They wanted to give me a gift card for $350 but I insisted on cash and they finally paid up.”