A UPS seasonal worker delivers packages on Cyber Monday in New York on Nov. 27, 2023.
Stephanie Keith | Bloomberg | Getty Images
Just before midnight on May 4, 2023, police were called to an Amazon warehouse in Chattanooga, Tennessee, to investigate a reported theft.
They were met by a loss prevention employee, who directed them to a warehouse worker named Noah Page, the suspected culprit, according to a police report of the incident that was obtained by CNBC.
When confronted by police, according to the report, Page admitted that he’d marked a customer’s order in Amazon’s internal system as returned even though the products were never actually sent back to the company. Page received $3,500 for his part in the scheme, the report said.
Page didn’t know the customer but had chosen to call him “Ralph,” the report said. Ralph, it turned out, was part of a group named Rekk, an expansive refund fraud organization that targeted major retailers and recruited company employees by promising them a cut of the profits, Amazon alleged in a lawsuit.
Refund fraud, which involves tricking retailers into refunding a customer for a purchase without an item being physically returned, has become so pervasive that groups now market their services on Reddit, TikTok and Telegram. Type in “refund method” — or “r3fund,” to skirt content moderators — on TikTok and videos will pop up of users showing off piles of cash, sneakers and iPhones. One video has the caption, “me after realizing you can get a refund on any Rick Owens if the ‘package never came,'” referring to the minimalist fashion brand. The clip shows a hand endlessly tossing shoes to the ground.
Fraud groups are taking advantage of retailers’ lenient return policies, experts told CNBC, which often include unlimited free returns and sometimes even a preference that customers keep the items. It’s ballooned into a massive problem for retailers, costing them more than $101 billion last year, according to a survey by the National Retail Federation and Appriss Retail. The figure includes multiple forms of fraud, such as sending back clothing after it’s been worn, known as “wardrobing,” and returning shoplifted merchandise, the survey said.
In December, Amazon filed a lawsuit against Page and 47 other people across the globe with alleged ties to Rekk, accusing them of conspiring to steal millions of dollars worth of products in a refund fraud operation. Amazon described these services as “illegitimate ‘businesses'” that look to “exploit the refund process for their own financial gain to the detriment of honest consumers and retailers who must bear the brunt of increased costs, decreased inventory, and service disruption that impacts genuine customers.”
Amazon also suffered more than $700,000 in losses at the hands of another alleged fraud ring in which 10 people were indicted last year, according to documents from a suit filed in 2023.
Robots transport goods to the employees in warehouse at Amazon fulfillment center in Eastvale on Tuesday, Aug. 31, 2021.
the Riverside Press-enterprise | Medianews Group | Getty Images
An Amazon spokesperson said the company is addressing the issue “head on” through specialized teams and machine learning tools that detect and prevent refund fraud. Amazon says its work with law enforcement has led to arrests, the dismantling of organized retail crime groups and civil lawsuits.
“We continue to make progress in identifying and stopping fraud before it happens, as well as dismantling the groups that attempt to damage the integrity of our store and the stores of retailers across the retail industry,” the spokesperson said in a statement.
Here’s how it works: A shopper buys a product online and sends the order information to a group such as Rekk, which then poses as the customer in requesting a refund. Amazon refunds the money to the customer, who then pays the fraud group usually between 15% and 30% of the refund amount, often via PayPal or with bitcoin. That means the customer ends up buying the product for what amounts to a huge discount.
The fraud group then pays the conspiring employee at the retailer, typically a certain amount for a batch of packages the employee scans as returned.
Retailers and law enforcement agencies are catching onto the trend. In September, a 25-year-old man in Michigan, Sajed Al-Maarej, was arrested and charged with conspiracy, wire fraud and mail fraud after he allegedly ran a return fraud service called Simple Refunds that targeted more than 50 retailers. The following month, 10 men were indicted in Oklahoma, charged with conspiracy to commit wire fraud for allegedly operating a refund fraud service named Artemis Refund Group. And a 24-year-old U.K. man was convicted of fraud in December after running the KeptSecrets refund service, which targeted retailers including Amazon, Walmart and Wayfair, according to court documents.
Following the Rekk scheme, Page was arrested when police showed up at the Chattanooga warehouse in May, and he was charged with theft of property worth more than $60,000. He pleaded guilty and was sentenced in November to three years of probation, as well as ordered to pay Amazon $5,000.
Page didn’t respond to requests for comment.
A thriving refund fraud market
For every refund fraud service shut down by law enforcement, swarms of similar groups remain open for business.
CNBC viewed several active refund fraud services on encrypted messaging app Telegram, each with thousands of followers. Updates are posted almost daily of new stores on their services, or new retailers that have been successfully targeted. Amazon and Apple are frequently hit, along with Nike, eBay, Saks Fifth Avenue and Ralph Lauren. Some groups even offer their services for DoorDash and Uber Eats orders, claiming users can “eat for free.”
The groups are highly organized and run like businesses, providing customer service, cataloging orders and creating fake shipping labels. Some sell how-to guides.
A Google form from an active refund fraud service explaining which stores it targets and how much it charges customers.
Source: Google
Fraudsters employ multiple strategies. A common one is to claim a package never arrived so that the retailer issues a refund. According to Amazon’s lawsuit, a Rekk user received a full refund for two MacBook Air laptops after filing a police report falsely claiming the products never arrived.
Mail-in fraud involves a user filling out a company’s return form, but instead of sending back the purchased product, users will mail an empty box or a package filled with junk. In the case of Simple Refunds, Al-Maarej, the man who allegedly operated the group, sent an unnamed retailer “an envelope filled with plastic toy frogs” instead of the tools he claimed he was returning, prosecutors said.
Al-Maarej also recruited employees at UPS and the U.S. Postal Service who either manipulated a package’s tracking history or input false “return to sender” notices to fool the retailer into thinking an item couldn’t be delivered or that it was sent to the wrong address, according to court documents.
Chris Black, an attorney for Al-Maarej, declined to comment. Amazon said its own internal investigation identified Al-Maarej’s scheme and contributed to the eventual indictment.
The company didn’t respond to questions specifically about how it monitors and handles bribery of its employees by ORC and refund fraud groups.
Rekk allegedly used bribes, offering Amazon staffers thousands of dollars a day to approve customer returns for products that were never sent back.
In a text message last year to Page, a Rekk representative said they’d been working with two other Amazon employees for about two months and offered them $4,000 for 30 orders marked as returned, according to court documents.
“They usually do 30 scans per day per shift,” the Rekk user wrote. “Sometimes they choose to do more. So at least 12k a week.”
According to the complaint, Rekk also recruited one of Page’s colleagues at CHA1, Amazon’s name for the Chattanooga facility. Between February 2023 and May 2023, the CHA1 employee allegedly approved product returns for 76 orders at Rekk’s request, causing Amazon to refund over $100,000 to customers, and netting $3,500 from the scheme.
A refund fraud service claims to have access to Amazon insiders in a Telegram post.
Source: Telegram
Amazon said it has tried to address the bribery problem. In its lawsuit against Rekk, the company said it has an internal customer protection and enforcement team made up of attorneys, former prosecutors, and analysts investigating organized crime schemes such as refund fraud. The company has also reportedly fired employees who were allegedly bribed to leak confidential data on third-party sellers.
Cyril Noel-Tagoe, a cybersecurity expert who has studied refund fraud extensively, said the economic incentive for low-wage workers to get involved with these schemes creates a perpetual challenge for retailers.
“If you’re offering an employee much more than they’re getting paid, then it’s quite hard to combat that,” Noel-Tagoe, who works as a principal security researcher at bot detection software company Netacea, told CNBC.
‘All you need is a phone’
Those on the lookout for moneymaking opportunities will find no shortage of promotional videos across social media. For a fee, you can learn how to play the game.
One TikTok video on the topic shows bags of Louis Vuitton, Gucci and Apple products and reads, “[Point of view]: You mastered the art of r3funding and started to teach others.” TikTok clips often serve as advertisements for a user’s Telegram channel that’s linked in the bio of their account.
Similar tactics are used on Reddit.
In the “Illegal Life Pro Tips” forum on Reddit, which is no longer active but counts 1.1 million members, refund scammers shared their tips and tricks. In recent days, Reddit banned an offshoot of that subreddit, called “illegallifeprotips2,” saying it violates the site’s rules “against transactions involving prohibited goods or services.” Users quickly resurfaced on a new subreddit, “ELegalLifeProTips.” After CNBC flagged “ELegalLifeProTips,” Reddit took down the subreddit for violating its ban evasion policy.
In the past, such illicit behavior ran rampant on the dark web and required VPNs and a special browser, said Brittany Allen, a trust and safety architect at fraud detection software company Sift. These days the perpetrators regularly discuss their activities openly on forums and in messaging apps, which Allen described as the “democratization of fraud.”
“You don’t need to be that specialist that can figure out how to find these deep web groups,” Allen said. “All you need is to have a phone that can go to Reddit, or a TikTok account you’re already on, and you’ll potentially be exposed to fraud that doesn’t take as much uplift to participate in.”
Remi Vaughn, a spokesperson for Telegram, told CNBC in an email that the company moderates “harmful content” on its platform, including posts that promote fraud. “Moderators use a combination of proactive moderation on public parts of the platform and accept user reports in order to remove content which breaches Telegram’s terms,” Vaughn added.
A Reddit spokesperson said it uses a combination of automated tooling and human moderators to enforce its content policies, which prohibit users from soliciting or facilitating any transaction that involves fraudulent services.
After CNBC provided TikTok with examples of videos about refund fraud, the company said it removed them for violating its community guidelines. It said it also blocked hashtags that were used to promote refund fraud.
The use of mainstream apps in these schemes has made it easier for investigators to do their work. Noel-Tagoe referenced a case in which a retailer was able to track down an individual whose email address was in an Instagram post.
Allen said she’s been able to identify fraudsters through “vouches,” or screenshots of successful fraudulent returns. Some of the images show order numbers, store pickup locations or cart items, according to Allen, all useful intel for retailers investigating return fraud.
David Johnston, vice president of asset protection and retail operations at the National Retail Federation, said an increasing number of companies are “tightening up their return policies” in response to customer abuse and fraudulent activity.
Delivery workers, for example, are encouraged to photograph a package once it reaches its destination, and retailers are looking more closely for suspicious behavior in analyzing returns.
“There are some retailers that monitor the number of returns you make in-store, and if you return too much too frequently, they might put you on pause,” Johnston said. “We’re starting to see more of that now on the e-commerce side.”
WATCH: The ‘shopping journey will drastically look different’
Piotr Swat | Lightrocket | Getty Images
AppLovin CEO Adam Foroughi provided more clarity on the ad-tech company’s late-stage effort to acquire TikTok, calling his offer a “much stronger bid than others” on CNBC’s The Exchange Friday afternoon.
Foroughi said the company is proposing a merger between AppLovin and the entire global business of TikTok, characterizing the deal as a “partnership” where the Chinese could participate in the upside while AppLovin would run the app.
“If you pair our algorithm with the TikTok audience, the expansion on that platform for dollars spent will be through the roof,” Foroughi said.
The news comes as President Trump announced he would extend the deadline a second time for TikTok’s Chinese-owned parent company ByteDance to sell the U.S. subsidiary of TikTok to an American buyer or face an effective ban on U.S. app stores. The new deadline is now in June, which, as Foroughi described, “buys more time to put the pieces together” on AppLovin’s bid.
“The president’s a great dealmaker — we’re proposing, essentially an enhancement to the deal that they’ve been working on, but a bigger version of all the deals contemplated,” he added.
AppLovin faces a crowded field of other interested U.S. backers, including Amazon, Oracle, billionaire Frank McCourt and his Project Liberty consortium, and numerous private equity firms. Some proposals reportedly structure the deal to give a U.S. buyer 50% ownership of the company, rather than a complete acquisition. The Chinese government will still need to approve the deal, and AppLovin’s interest in purchasing TikTok in “all markets outside of China” is “preliminary,” according to an April 3 SEC filing.
Correction: A prior version of this story incorrectly characterized China’s ongoing role in TikTok should AppLovin acquire the app.
U.S. President Donald Trump speaks during an event announcing new tariffs in the Rose Garden at the White House in Washington, April 2, 2025.
Chip Somodevilla | Getty Images
President Donald Trump announced an aggressive, far-reaching “reciprocal tariff” policy this week, leaving many economists and U.S. trade partners to question how the White House calculated its rates.
Trump’s plan established a 10% baseline tariff on almost every country, though many nations such as China, Vietnam and Taiwan are subject to much steeper rates. At a ceremony in the Rose Garden on Wednesday, Trump held up a poster board that outlined the tariffs that it claims are “charged” to the U.S., as well as the “discounted” reciprocal tariffs that America would implement in response.
Those reciprocal tariffs are mostly about half of what the Trump administration said each country has charged the U.S. The poster suggests China charges a tariff of 67%, for instance, and that the U.S. will implement a 34% reciprocal tariff in response.
However, a report from the Cato Institute suggests the trade-weighted average tariff rates in most countries are much different than the figures touted by the Trump administration. The report is based on trade-weighted average duty rates from the World Trade Organization in 2023, the most recent year available.
The Cato Institute says the 2023 trade-weighted average tariff rate from China was 3%. Similarly, the administration says the EU charges the U.S. a tariff of 39%, while the 2023 trade-weighted average tariff rate was 2.7%, according to the report.
In India, the Trump administration claims that a 52% tariff is charged against the U.S., but Cato found that the 2023 trade-weighted average tariff rate was 12%.
Many users on social media this week were quick to notice that the U.S. appeared to have divided the trade deficit by imports from a given country to arrive at tariff rates for individual countries. It’s an unusual approach, as it suggests that the U.S. factored in the trade deficit in goods but ignored trade in services.
The Office of the U.S. Trade Representative briefly explained its approach in a release, and stated that computing the combined effects of tariff, regulatory, tax and other policies in various countries “can be proxied by computing the tariff level consistent with driving bilateral trade deficits to zero.”
“If trade deficits are persistent because of tariff and non-tariff policies and fundamentals, then the tariff rate consistent with offsetting these policies and fundamentals is reciprocal and fair,” the USTR said in the release.
Microsoft CEO Satya Nadella speaks during the Microsoft Build conference at Microsoft headquarters in Redmond, Washington, on May 21, 2024.
Jason Redmond | AFP | Getty Images
A half-century ago, childhood friends Bill Gates and Paul Allen started Microsoft from a strip mall in Albuquerque, New Mexico. Five decades and almost $3 trillion later, the company celebrates its 50th birthday on Friday from its sprawling campus in Redmond, Washington.
Now the second most valuable publicly traded company in the world, Microsoft has only had three CEOs in its history, and all of them are in attendance for the monumental event. One is current CEO Satya Nadella. The other two are Gates and Steve Ballmer, both among the 11 richest people in the world due to their Microsoft fortunes.
While Microsoft has mostly been on the ascent of late, with Nadella turning the company into a major power player in cloud computing and artificial intelligence, the birthday party lands at an awkward moment.
The company’s stock price has dropped for four consecutive months for the first time since 2009 and just suffered its steepest quarterly drop in three years. That was all before President Donald Trump’s announcement this week of sweeping tariffs, which sent the Nasdaq tumbling on Thursday and Microsoft down another 2.4%.
Cloud computing has been Microsoft’s main source of new revenue since Nadella took over from Ballmer as CEO in 2014. But the Azure cloud reported disappointing revenue in the latest quarter, a miss that finance chief Amy Hood attributed in January to power and space shortages and a sales posture that focused too much on AI. Hood said revenue growth in the current quarter will fall to 10% from 17% a year earlier
Nadella said management is refining sales incentives to maximize revenue from traditional workloads, while positioning the company to benefit from the ongoing AI boom.
“You would rather win the new than just protect the past,” Nadella told analysts on a conference call.
The past remains healthy. Microsoft still generates around one-fifth of its roughly $262 billion in annual revenue from productivity software, mostly from commercial clients. Windows makes up around 10% of sales.
Meanwhile, the company has used its massive cash pile to orchestrate its three largest acquisitions on record in a little over eight years, snapping up LinkedIn in late 2016, Nuance Communications in 2022 and Activision Blizzard in 2023, for a combined $121 billion.
“Microsoft has figured out how to stay ahead of the curve, and 50 years later, this is a company that can still be on the forefront of technology innovation,” said Soma Somasegar, a former Microsoft executive who now invests in startups at venture firm Madrona. “That’s a commendable place for the company to be in.”
When Somasegar gave up his corporate vice president position at Microsoft in 2015, the company was fresh off a $7.6 billion write-down from Ballmer’s ill-timed purchase of Nokia’s devices and services business.
Microsoft is now in a historic phase of investment. The company has built a $13.8 billion stake in OpenAI and last year spent almost $76 billion on capital expenditures and finance leases, up 83% from a year prior, partly to enable the use of AI models in the Azure cloud. In January, Nadella said Microsoft has $13 billion in annualized AI revenue, more even than OpenAI, which just closed a financing round valuing the company at $300 billion.
Microsoft’s spending spree has constrained free cash flow growth. Guggenheim analysts wrote in a note after the company’s earnings report in January, “You just have to believe in the future.”
Of the 35 Microsoft analysts tracked by FactSet, 32 recommend buying the stock, which has appreciated tenfold since Nadella became CEO. Azure has become a fearsome threat to Amazon Web Services, which pioneered the cloud market in the 2000s, and startups as well as enterprises are flocking to its cloud technology.
Winston Weinberg, CEO of legal AI startup Harvey, uses OpenAI models through Azure. Weinberg lauded Nadella’s focus on customers of all sizes.
“Satya has literally responded to emails within 15 minutes of us having a technical problem, and he’ll route it to the right person,” Weinberg said.
Still, technology is moving at an increasingly rapid pace and Microsoft’s ability to stay on top is far from guaranteed. Industry experts highlighted four key issues the company has to address as it pushes into its next half-century.
Microsoft didn’t respond to a request for comment.
Regulation
There’s some optimism that the Trump administration and a new head of the Federal Trade Commission will open up the door to the kinds of deal-making that proved very challenging during Joe Biden’s presidency, when Lina Khan headed the FTC.
But regulatory uncertainty remains.
It’s not a new risk for Microsoft. In 1995, the company paid a $46 million breakup fee to tax software maker Intuit after the Justice Department filed suit to block the proposed deal. Years later, the DOJ got Microsoft to revamp some of its practices after a landmark antitrust case.
Microsoft pushed through its largest acquisition ever, the $75 billion purchase of video game publisher Activision, during Biden’s term. But only after a protracted legal battle with the FTC.
At the very end of Biden’s time in office, the FTC opened an antitrust investigation on Microsoft. That probe is ongoing, Bloomberg reported in March.
Nadella has cultivated a relationship with Trump. In January, the two reportedly met for lunch at Trump’s Mar-a-Lago resort in Florida, alongside Tesla CEO Elon Musk.
President Donald Trump shakes hands with Microsoft CEO Satya Nadella during an American Technology Council roundtable at the White House in Washington on June 19, 2017.
Nicholas Kamm | AFP | Getty Images
The U.S. isn’t the only concern. The U.K.’s Competition and Markets Authority said in January that an independent inquiry found that “Microsoft is using its strong position in software to make it harder for AWS and Google to compete effectively for cloud customers that wish to use Microsoft software on the cloud.”
Microsoft last year committed to unbundling Teams from Microsoft 365 productivity software subscriptions globally to address concerns from the European Union’s executive arm, the European Commission.
Noncore markets
Fairly early in Microsoft’s history the company became the world’s largest software maker. And in cloud, Microsoft is the biggest challenger to AWS. Most of the company’s revenue comes from corporations, schools and governments.
But Microsoft is in other markets where its position is weaker. Those include video games, laptops and search advertising.
Mary Jo Foley, editor in chief at advisory group Directions on Microsoft, said the company may be better off focusing on what it does best, rather than continuing to offer Xbox consoles and Surface tablets.
“Microsoft is not good at anything in the consumer space (with the possible exception of gaming),” wrote Foley, who has covered the company on and off since 1984. “You’re wasting time and money on trying to figure it out. Microsoft is an enterprise company — and that is more than OK.”
It’s unlikely Microsoft will back away from games, particularly after the Activision deal. Nearly $12 billion of Microsoft’s $69.6 billion in fourth-quarter revenue came from gaming, search and news advertising, and consumer subscriptions to the Microsoft 365 productivity bundle. That doesn’t include sales of devices, Windows licenses or advertising on LinkedIn.
“As a company, Microsoft’s all-in on gaming,” Nadella said in 2021 in an appearance alongside gaming unit head Phil Spencer. “We believe we can play a leading role in democratizing gaming and defining that future of interactive entertainment, quite frankly, at scale.”
AI pressure
Microsoft has an unquestionably strong position in AI today, thanks in no small part to its early alliance with OpenAI. Microsoft has added the startup’s AI models to Windows, Excel, Bing and other products.
The breakout has been GitHub Copilot, which generates source code and answers developers’ questions. GitHub reached $2 billion in annualized revenue last year, with Copilot accounting for more than 40% of sales growth for the business. Microsoft bought GitHub in 2018 for $7.5 billion.
Microsoft CEO Satya Nadella, right, speaks as OpenAI CEO Sam Altman looks on during the OpenAI DevDay event in San Francisco on Nov. 6, 2023.
Justin Sullivan | Getty Images
But speedy deployment in AI can be worrisome.
The company is “not providing the underpinnings needed to deploy AI properly, in terms of security and governance — all because they care more about being ‘first,'” Foley wrote. Microsoft also hasn’t been great at helping customers understand the return on investment, she wrote.
AI-ready Copilot+ PCs, which Microsoft introduced last year, aren’t gaining much traction. The company had to delay the release of the Recall search feature to prevent data breaches. And the Copilot assistant subscription, at $30 a month for customers of the Microsoft 365 productivity suite, hasn’t become pervasive in the business world.
“Copilot was really their chance to take the lead,” said Jason Wong, an analyst at technology industry researcher Gartner. “But increasingly, what it’s seeming like is Copilot is just an add-on and not like a net-new thing to drive AI.”
Innovation
At 50, the biggest question facing Microsoft is whether it can still build impressive technology on its own. Products like the Surface and HoloLens augmented reality headset generated buzz, but they hit the market years ago.
Teams was a novel addition to its software bundle, though the app’s success came during the Covid pandemic after the explosive growth in products like Zoom and Slack, which Salesforce acquired. And Microsoft is still researching quantum computing.
In AI, Microsoft’s best bet so far was its investment in OpenAI. Somasegar said Microsoft is in prime position to be a big player in the market.
“To me, it’s been 2½ years since ChatGPT showed up, and we are not even at the Uber and Airbnb moment,” Somasegar said. “There is a tremendous amount of value creation that needs to happen in AI. Microsoft as much as everybody else is thinking, ‘What does that mean? How do we get there?'”
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