This viral TikTok refund scheme is driving up prices on Amazon

Photo by Nordskov Media, Public Domain via Flickr

Online retail theft is a multibillion-dollar problem, and it is driving up costs for everyone, and it is getting worse because of TikTok.

From fashion tips and travel adventures to cooking “hacks,” the TikTok app is jam-packed with “viral” videos made by content creators, but sometimes, those popular videos contain subject matter that can lead to serious crimes.

Now one viral TikTok refund scheme has been uncovered, and it’s costing everyone across the country billions of dollars.

TikTok scheme costs retailers big-time, driving up prices

Some content creators on TikTok are forming groups that work together to commit refund fraud.

These fraudsters target major retailers like Amazon by recruiting employees and promising to give them a portion of the profits.

The fraud involves tricking retailers into refunding customers for purchases without the item actually being returned.

It has become so extensive that some of the groups are even marketing their services on platforms like Reddit and Telegram.

They use terms like “refund method” or “r3fund” to remain hidden from app administrators and moderators.

Some of the TikTok videos show people flashing piles of cash, high-end sneakers, and iPhones, with one video including the caption, “me after realizing you can get a refund on any Rick Owens if the ‘package never came.’”

Experts told CNBC that the fraud groups take advantage of larger retailers’ lax return policies, which often include free returns or even allowing customers to keep the items.

A survey by the National Retail Federation and Appriss Retail found that these schemes cost businesses over $101 billion last year. 

Some people purchase items and then return shoplifted merchandise to essentially “exchange” the items for a refund and receive higher-end pieces with designer labels in a scheme called “wardrobing.”

Amazon filed a lawsuit against one fraudster along with 47 others located across the globe with alleged ties to the content creator.

The company accused the group of conspiring to steal millions of dollars worth of products, calling them “illegitimate businesses” that try to “exploit the refund process for their own financial gain to the detriment of honest customers and retailers who must bear the brunt of increased costs, decreased inventory, and service disruption that impacts genuine customers.”

Another fraud ring cost Amazon $700,000 after 10 people were indicted last year. 

In that scheme, shoppers bought products online and sent the information to the group who posed as the customer and requested a refund.

The company gives the refund to the customer and pays the fraud group a commission of between 15% and 30% of the refund amount via platforms like PayPal or through cryptocurrency like Bitcoin.

A global problem

The TikTok refund scheme is affecting companies worldwide.

According to court documents, a 24-year-old UK man was convicted of fraud after running a refund fraud group that targeted Amazon, Walmart, and Wayfair.

CNBC found there are still active refund fraud groups on Telegram with thousands of followers and updates being posted daily.

The groups are run like businesses and offer customer service, with some offering to sell how-to guides for a fee.

One TikTok video about the scheme showed Gucci and Louis Vuitton bags, Apple products, and more, saying, “[Point of view]: You mastered the art of r3rfunding and started to teach others.”

As these schemes continue to run rampant on the TikTok app and other platforms, investigators are starting to become more vigilant, but for many retailers, the damage has already been done.

Informed American will keep you up-to-date on any developments to this ongoing story.