Amazon.com Inc. filed a lawsuit accusing former employees and others of illegally defrauding the company of hundreds of thousands of dollars as part of an international fraud ring. 

Alleged international fraud organization REKK committed “systematic refund abuse,” Amazon claimed in a lawsuit filed in the U.S. District Court in Seattle. The returns described by Amazon in the suit took place over nearly a year, between June 2022 and May 2023. 

Amazon ranks No. 1 in the 2023 Digital Commerce 360 Top 1000, a database of North America’s leading retailers by online sales. 

How the fraudulent refunds worked

REKK’s scheme centered around ordering products through Amazon’s marketplace, the ecommerce giant asserted. Then REKK charged a fee to get the person who ordered the product a refund without actually returning the product, the suit says. For example, one defendant is said to have placed an order for five iPads. Then, through an Amazon fulfillment employee, REKK altered Amazon’s systems to falsely reflect that the iPads were returned, triggering refunds. In addition to the stolen iPads, REKK was paid hundreds of dollars for facilitating the theft, per the lawsuit. 

In another case, REKK is said to have impersonated an Amazon customer ordering two MacBook Air laptops. The group then falsified a police report stating that the products were never delivered. Again, REKK was paid a fee for facilitating the crime. 

REKK carried out the fraudulent returns through the cooperation of Amazon employees, according to the lawsuit, which names seven former employees. Amazon alleges REKK finds employees through Reddit, LinkedIn, and Telegram. The group then uses these social channels to advertise itself to potential customers. The REKK subreddit, since taken down, described its services in a screenshot shown in the lawsuit. “Refunding is when you buy a product and then trick the company into thinking you have returned the product,” the post read.

Who was recruited

REKK recruited one then-employee at a Chattanooga fulfillment center, Janiyah Alford, to approve returns for products that were not actually returned. REKK initially offered Alford $100 per fraudulent return, according to screenshots of text messages in the court filing. Amazon alleges that Alford approved 76 fraudulent returns between February and May 2023 in exchange for a payment of $3,500. The returns caused Amazon to refund more than $100,000 to REKK members. 

Alford told The New York Times that messages asking her to join in the return fraud included her home address and addresses of family members, which she interpreted as a threat.

Another former employee at the Chattanooga center, Noah Page, approved fraudulent returns of 56 items, per the suit. He received $5,000 in exchange for the returns. Amazon says Page’s actions caused more than $75,000 in refunds to REKK members.

Uncovering the fraud

Amazon says it spends more than a billion dollars annually to fight fraud. In 2022, the retailer spent $1.2 billion and employed 15,000 people to find and eliminate fraud, according to the lawsuit. One Amazon investigator ordered an iPad Pro for $2,066.99, then filled out REKK’s service request form through Telegram. The investigator paid $309 to a PayPal account associated with REKK. The investigator then received a refund for the full cost of the iPad.

“When fraud is detected, as in this case, Amazon takes a variety of measures to stop the activity, including issuing warnings, closing accounts, and preventing individuals who engaged in refund fraud from opening new accounts,” Amazon vice president Dharmesh Mehta said in a statement. “This lawsuit serves as a clear and strong message to bad actors that Amazon will not stand for attempts to damage the integrity of our store.”

The scope of return fraud

Fraud isn’t a new threat for Amazon. However, the retailer’s investment in tracking down this case shows how big the problem has become, says Eleanor Ritchie, product manager of return abuse solutions at fraud prevention vendor Signifyd. 

This case “shows that there’s enough of a scope here at the world’s largest retailer that this is no longer just the cost of doing business,” she says.

Fraudulent returns make up about 8%-10% of total returns in online retail, according to Signifyd’s research. In 2022, online returns surpassed $200 billion. Signifyd estimates about $20 billion of those were fraudulent. 

The REKK case is likely not an isolated incident, Ritchie says.

“We have to assume there are more fraudulent attempts happening here that they [retailers] aren’t necessarily onto quite yet. This is just the most egregious example we’re seeing in this particular lawsuit,” she says.

Ritchie says she believes REKK and similar groups are targeting other major ecommerce retailers alongside smaller retailers.

Quantifying returns abuse can be difficult because many retailers have a poor definition of what a fraudulent return is, Ritchie says. As return fraud starts showing up on retailers’ bottom lines, they will likely start investing in monitoring returns more closely. Retailers, especially Amazon, aren’t likely to tighten up their returns perks across the board because customers value them, she says. Instead, she expects to see retailers use machine learning and other AI tools to track returns more closely and make intelligent assumptions about who might be committing fraud.

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