On October 23, 2018, in the District of Minnesota, Yu Zhang pled guilty to conspiracy to commit wire fraud in connection with an interstate scheme to defraud by falsely impersonating Internal Revenue Service (IRS) employees. Zhang was indicted for the offense in July 2018.

According to the court documents, from at least March 12, 2018 to June 8, 2018, Zhang conspired with others to participate in a scheme to defraud and to obtain money by material false and fraudulent pretenses. Zhang’s coconspirators contacted victims in numerous States throughout the country by telephone, falsely claimed to be IRS agents or other Government officials, and threatened the victims with arrest unless they made immediate payment for delinquent taxes.

The callers instructed the victims to go to Target™, purchase gift cards, and provide the gift card numbers and activation codes to the callers over the phone. Zhang, at the direction of his coconspirators, traveled to Target stores in multiple States, including Minnesota, Illinois, and Colorado, to redeem the Target gift cards by purchasing third-party gift cards. In order to redeem a Target gift card, a coconspirator would send Zhang a message on his cell phone containing the gift card number and redemption code immediately after the victim had purchased it. Zhang would then redeem the card within minutes of receiving the message by scanning a bar code displayed on his cell phone. To avoid detection by Target personnel, Zhang would use the self-checkout registers for his transactions and would travel to multiple Target stores each day.

For example, according to the indictment, on May 31, 2018, an individual claiming to be an IRS employee contacted a victim in Iowa, said the victim owed more than $4,000 in taxes, and threatened the victim with arrest. The IRS impersonator then demanded that the victim go to the nearest Target store and purchase two $2,000 gift cards, which the scammer claimed that the IRS used as “Taxpayer Identification Forms.” The victim complied, used cash to purchase the gift cards, and provided the card numbers and activation codes to the IRS impersonator. The impersonator then instructed the victim to purchase an additional gift card for $2,000, to have the “arrest warrant” removed. The victim purchased a third $2,000 gift card.

Target surveillance cameras showed the victim leaving the Target store in Iowa after purchasing the third gift card. Thirty minutes later, Zhang used that same gift card at a Target store in Minnesota to purchase $1,000 worth of prepaid third-party gift cards issued by Google Play™ and Steam™. He then traveled to another Target store in Minnesota and used the remaining $1,000 to purchase additional Google Play and Steam cards. Zhang was arrested at a Target store in Andover, Minnesota, and at the time of his arrest had in his possession several hundred third-party gift cards worth tens of thousands of dollars.

Zhang knew the funds he was handling were obtained through criminal activities and admitted that between May 28, 2018 and June 8, 2018, he had redeemed approximately $240,000 worth of Target gift cards by conducting hundreds of transactions. He further admitted that between March 1, 2018 and May 28, 2018, he had traveled to Colorado and conducted more than $10,000 in similar transactions.

Zhang could face a maximum statutory sentence of 5 years’ imprisonment. His sentencing is set for February 27, 2019.

Source:  The facts in this case narrative come from the following publicly available documents: D. Minn. Crim. Compl. filed June 8, 2018; D. Minn. Indict. filed July 10, 2018; D. Minn. Plea Agr. filed Oct.23, 2018; D. Minn. Crim. Docket as of Dec. 7, 2018.