Charlotte resident Hudson Hamrick pleaded guilty on Tuesday to wire fraud for running a return scheme on Amazon that defrauded the ecommerce giant of at least $290,000.
According to Court documents, the scam ran from 2016 to 2020 and involved 300 fraudulent transactions. The perpetrator has been sentenced to 20 years and a fine of at least $250,000.
How The Scammer Did It
Hamrick’s scheme is by no means new to Amazon (and to the third party sellers who often eat a lot of the losses over these scams).
According to the US Department of Justice, Hudson would order expensive items on Amazon, including electronics, guitars, tools, computers and other high-end consumer products and obtain fraudulent refunds for them through Amazon’s return system by returning items that were significantly cheaper or broken.
Hamrick’s plea documents also reveal that he would obtain replacement products for items which he claimed were “lost or damaged” and resell them online, thereby profiting both from the refunded amount and from the sale of replacement products.
Local news outlets have cited specific examples of how Hamrick (and a lot of other Amazon fraudsters, really) would execute their scheme.
For instance, Hamrick bought a professional coffee machine in 2019 for a little over $3,500. He then asked to return it about a week later and successfully obtained a refund. Instead of returning the coffee machine, Hamrick sent in a different machine worth significantly less and proceeded to resell the more expensive, unspoiled one online for a hefty profit. Worse, he was able to resell some of the equipment using his own Amazon account.
Other items specifically mentioned include an iMac and a Fuji Spray System. Hamrick also sold other new and expensive items he received on eBay.
Refund Scams Are Nothing New On Amazon
Amazon sellers face return scams on a routine basis, but the staggering amounts and the length of time that fraudsters are able to execute their schemes are quite alarming.
- Back in March, a Rhode Island man was sentenced to 30 months in federal prison for running a similar return scam and duping Amazon for more than $50,000.
- In 2020, a woman in Florida was arrested for a shipping and return scam involving 31 Amazon accounts (all of which belonged to her) and over $100,000 reimbursed to her name. Her scheme involved using prepaid shipping labels generated for canceled orders and applying those on other returns—this made it seem like she had paid for her own shipping costs on returns.
- Much earlier, in 2018, Engadget reported that return policy abusers were sentenced to nearly 6 years for defrauding Amazon out of more than $1.2 million.
Return scams even hit low-scale sellers. Just this week, a post in Amazon seller forums had someone losing about $3000 on a similar scam.
Amazon’s Customer-Centric Return Policy Often Hurts Sellers
Amazon’s focus as a retail company is to be customer-friendly, but it’s system is not exactly foolproof and could hurt third party sellers trying to make an honest living on the platform. Return fraud has been reported regarding the company’s 30-day return policy, chargeback period, and A-Z claim system, among others.
Earlier this year, Amazon implemented a ‘first scan’ refund procedure that instantly refunds customers as soon as a returned item’s prepaid label is scanned by the carrier (i.e. UPS). Amazon reserves the right to reverse the refund if the item is not the original item purchased, however often Amazon simply relies on the barcode on the product packaging matching the purchased item, meaning the item in the packaging can potentially be completely different from what should be inside and Amazon will recognize the return as being accurate.
While the millions of active users and hundreds of millions of products being bought and sold on Amazon means that not all customer scams on the platform get detected, Amazon has thousands of employees and a near endless capital, so return scams that blow up to a quarter of a million dollars is distressing for third party sellers. Sellers need to be vigilant and protect their brands to the T.
If you’re a seller and have been the victim of return fraud, please let us know in the comments section down below.