Victims of gift-card scam sue Target, allege Minneapolis retailer profited from fraud

Four fraud victims who were tricked by con artists into buying Target gift cards as part of scams allege the retailer is purposefully failing to catch criminals because the company profits from selling ill-gotten merchandise.

The victims, all residents of Pennsylvania, on Monday filed a putative class-action lawsuit against Minneapolis-based Target in federal court. The complaint in the U.S. District of Minnesota accuses Target of systematically failing to effectively use its own security algorithms and real-time tracking software to stop vulnerable people from being taken advantage of by scammers.

All of the plaintiffs were tricked into buying Target gift cards under a fraud known as “the impersonator scam,” according to the lawsuit. The grift involves a criminal who poses as a representative of a business or a government agency and convinces a victim to wire money or provide access to financial accounts.

“While we cannot comment on pending litigation, we take significant steps to combat this type of criminal activity and protect consumers,” a Target spokesperson said in a statement.

In a July 2021 incident described in the lawsuit, Robert Reese of Pittsburgh received an email he believed came from Amazon’s customer service department. The email confirmed a $1,199.99 laptop purchase billed to Reese’s account, which Reese never made, prompting Reese to email the fake customer service representative, who was actually a con man.

The fake Amazon representative, who called himself “Mark Williams,” then told Reese he made an error when refunding Reese’s money. He sent pictures that appeared to be from his bank account, showing a $12,000 credit, and convinced Reese he needed to pay Amazon back $10,800 in gift cards.

The scammer threatened that if Reese did not follow through, his credit score would suffer.

Reese was convinced to drive across town to different gift-card sellers, including Sam’s Club, CVS and Rite Aid to buy and activate a dozen $500 Target gift cards, worth $6,000 in all. If a store clerk were to ask about a purchase, the scammer told Reese to lie and say the gift card was a wedding gift for his niece, the lawsuit says.

Reese then read the access codes on the back of each gift card to the scammer while on the phone, according to the lawsuit. Those codes were then added to the scammer’s Target account and used to purchase merchandise from Target.

Friends soon led Reese to conclude he was the victim of a scam. He contacted the FBI, an area police department and the state Attorney General’s Office the next day.

Five days after the incident, Reese also contacted Target directly by email, telling the company he was a victim of a scam. He learned the $6,000 had been spent and “that there was nothing [Target] could do,” according to the lawsuit.

In 2024, Minnesotans lost $144.6 million to all forms of fraud, according to an annual summary report of data from the Federal Trade Commission. Another study in 2023 showed gift cards were the most popular payment method for many types of impersonator scams.

A federal analysis of reported fraud concluded Apple gift cards were “far and away” the most popular brand that thieves convinced consumers to buy. Target came in second, tallying 14% of gift-card fraud, followed by eBay, Walmart and Amazon.

In December, Apple agreed to pay $35 million to settle a class action concerning fraud involving its iTunes gift cards. In that case, consumers were tricked into buying the cards by third parties. Lawyers representing the plaintiffs accused Apple of profiting from the scams. Apple denied responsibility to issue refunds to victims and did not admit wrongdoing as part of the settlement.

Like many retailers, Target has taken steps to address a rising tide of computer fraud making waves across the country.

“In addition to partnering with state and federal law enforcement, we leverage in-store prevention methods, and our cybersecurity experts work diligently to identify and mitigate fraud, proactively monitor trends and create solutions that we share with industry partners,” the company spokesperson said.

Target manages several websites that explain common scams, including one geared toward gift-card fraud prevention. A section on gift-card “victim-assisted fraud scams” describes warning signs of a such a scheme and links to an FTC consumer advice website.

In 2023, the Minneapolis-based retailer launched a campaign with Cybercrime Support Network (CSN) focused on expanding consumer knowledge of online financial scams. It has also teamed up with law enforcement, gift-card processors and other retail leaders to establish a Gift Card Fraud Prevention Alliance. Target also operates a Cyber Fusion Center to monitor security threats.

In the lawsuit, the four fraud victims are asking a federal judge to allow a larger national class action against Target. Their lawyers estimate the same type of fraud has affected hundreds of thousands of people who collectively lost millions of dollars to gift-card scams.

Three of the four victims, including Reese, contacted Target seeking a refund and were denied one, according to the lawsuit. The fourth did not bother to contact the company because she believed Target would not help her based on her conversation with law enforcement.

In addition to failing to deploy its computer resources to stop fraudsters from making purchases, the consumers allege Target has done too little to inform people buying its gift cards of the potential for abuse by fraudsters. The company is also misrepresenting to the public that there is “nothing Target can do after Target gift cards are spent,” the lawsuit says