Walmart Negligent in Money Transfer Scam: Class Action

Walmart and Cash App are a “top choice for scammers,” said the complaint, noting the defendants have been subject to FTC orders and government investigations, including a June 2022 complaint (docket 1:22-cv-03372) by the FTC alleging violations of the FTC, Telemarketing and Consumer Fraud and Abuse Prevention acts and the FTC’s Telemarketing Sales Rule.

Cash App allows users to send, receive and deposit paper money into Cash App accounts through participating retailers, and to transfer money to linked bank accounts and Cash App debit cards, said the complaint. To deposit paper money into a Cash App account, a consumer must visit a participating retailer and show the retailer a barcode generated by the consumer's Cash App account. The retailer then accepts the paper money and electronically transfers funds to the person's Cash App account affiliated with the barcode, it said.

Walmart advertises itself as a “'one-stop shop for financial services,’ which has translated to a one-stop shop for scammers who know that Walmart does not have adequate protections to flag and prevent fraud,” said plaintiff Risa Potters, 73, of Agoura Hills, California.

Between March 31 and April 1, Potters was “victimized by a caller who identified himself as a police officer,” the complaint said, and told her a subpoena had been sent to a previous address requiring her to appear in court regarding treatment of one of her chiropractic patients. The caller said because she had not appeared, the judge had issued a $10,000 bond against her, the complaint said. The caller directed Potter to make several deposits into Cash App accounts using barcodes purportedly associated with a bond account that belonged to a court. Potters didn’t know, “and Walmart did not inform her, that these were Cash App barcodes," it said.

The caller directed Potters to Walmart stores in Southern California, “where Walmart facilitated the transfers without question,” said the complaint. Walmart didn’t raise any “red flags” when Potters, who had never used its services, first attempted to deposit $10,000 into a Cash App barcode. “Nor did Walmart notify her that a Cash App paper money deposit is not intended for money transfers,” the complaint said. Instead, Walmart allowed her to transfer $4,000 in less than 24 hours, it said.

At one Walmart store, Potters told a service desk employee she needed to send $10,000 to the barcode the scammer had given her. She was told there was a $1,500 limit per store per day and a maximum $500 per transaction. The Walmart employee told Potters the first barcode had expired. Potters then pulled up more barcodes being sent by the scammer via text -- “barcodes which should only be generated within the Cash App” -- said the complaint. “The Walmart store employee then scanned the screenshot of the new barcode, and the transaction went through,” it said; the employee then processed two additional $500 transactions, it said.

The Walmart employee “did not at any time warn Plaintiff that receiving Cash App deposit barcodes from another person, as Plaintiff was doing in front of the Walmart store employee, was likely related to fraudulent activity,” said the complaint. The employee didn’t inform Potters that Cash App deposits should only be made into her own Cash App account “and not used to transfer funds to others,” it said. The employee also didn’t attempt to link ID from Potters to a Cash App account, it said.

“No suspicions were raised even though a 73-year-old woman who had never used Walmart financial services before attempted to put $10,000 onto a Cash App barcode belonging to an App she had never heard of -- which the Walmart employee would have known if Walmart had an effective [anti-money laundering] policy in place,” the complaint said. “Nor did it raise any red flags that Plaintiff was digging through her text messages for unexpired Cash App barcodes rather than generating them through the App,” it said.

Cash App’s deposit system allowed scammers to “simply text screenshots of barcodes associated with various scam Cash App accounts” and send them to Potters, said the complaint. Cash App has no protocol in place for linking an ID to a Cash App account, “allowing scammers to take full advantage of cash deposits onto Cash App barcodes,” it said. In the end, Potters “was scammed out of thousands of dollars” that were transmitted via the Cash App system at Walmart stores, it said. Potters “has never recovered her lost funds,” it said.

Walmart and Cash App “know that telemarketing and other mass marketing frauds, such as ‘grandparent’ scams and government agent impersonator scams, induce people to use Walmart’s and/or Cash App’s services to send money to domestic and international fraud rings,” said the complaint. Despite that knowledge, the defendants have continued to process “fraud-induced money transfers at Walmart stores and via Cash App’s system without adopting adequate policies and practices to effectively detect and prevent these fraudulent transfers,” in violation of federal and state laws, it said.

Potters claims breach of the covenant of good faith and fair dealing, violations of the Consumers Legal Remedies Act, California’s Unfair Competition Law and negligence. She seeks compensatory, statutory and punitive damages; an order requiring defendants to disgorge, restore and return all monies wrongfully obtained, with interest; attorneys’ fees and legal costs; and pre- and post-judgment interest. Walmart and Cash App didn't comment.