Nearly $200 million in relief designated for California's low-income families was siphoned from their Electronic Benefit Transfer (EBT) accounts, primarily through unauthorized ATM withdrawals, the Justice Department said.
Last Thursday, the U.S. Attorney's Office for the Southern District of California, in conjunction with the U.S. Secret Service, announced the arrest of seven people linked to a scheme that drained $181 million from the EBT accounts of California's most vulnerable.
Between June 2022 and February of this year, the organized criminal operation exploited security vulnerabilities to illegally access and drain the federally funded accounts of those most in need.
"EBT fraud continues to be an issue in California and throughout the nation," U.S. Secret Service Office of Investigations Assistant Special Agent in Charge Michael Peck said in a statement. "The U.S. Secret Service will continue to investigate and arrest those responsible for EBT fraud as we seek to disrupt their networks and protect our most vulnerable communities."
According to the Justice Department, the scheme unfolded as members of the criminal enterprise installed skimming devices—a card reader that can be disguised—in ATMs and point-of-sale terminals across various locations in California. The devices were placed in areas known for a higher concentration of public assistance beneficiaries, maximizing the potential for data theft.
Read more: Guide to ATM Withdrawal Limits
The skimmers captured the account information from EBT cards when unknowing recipients used their cards to withdraw cash or make purchases.
Once the account data was obtained, it was cloned onto magnetic strips of other plastic cards—often generic blank cards or other types of debit or credit cards, the Justice Department said. The process created what are commonly known as "cloned cards."
The cards were unique in that the information encoded on the magnetic strip did not match the numbers or names embossed on the face of the card. To complete transactions with the cloned cards, the criminals often stuck labels with the PINs directly onto the cards, ensuring easy access to the funds during ATM transactions or at stores.
"EBT fraud literally takes food out of the mouths of children," U.S. Attorney Tara McGrath said in a statement.
"Parents who don't know they've been targeted get to the grocery checkout and discover their EBT cards have been wiped clean. We are taking proactive steps to prevent this appalling crime and punish those who take advantage of vulnerable people."
The operation was highly organized, the Justice Department said, indicating that those involved were part of a larger, structured criminal network with the specific intent to defraud the state's EBT system. The method allowed them to withdraw EBT funds at ATMs in the state and to purchase goods using the stolen benefit dollars, thereby laundering the stolen funds through retail transactions.
Newsweek reached out to the U.S. Attorney's Office for the Southern District of California by email for comment on Wednesday.
California is among the top states in the U.S. for EBT usage, according to data issued by the U.S. Department of Agriculture, leading the nation in both the volume of transactions and the amount of benefits distributed.
Roughly 5.1 million Californian's received a total of $14.5 billion in EBT benefits in 2023, which worked out to an average monthly benefit of $185 per recipient.
Eligibility for the benefits in the state requires families to meet certain income thresholds, which are designed to ensure that assistance reaches those in greatest need. To qualify for the EBT program, more commonly known as food stamps, households must have a gross monthly income at or below 200 percent of the Federal Poverty Level.
For example, a single person's income must not exceed $2,430 per month, while a family of four income must be under $5,000 per month. After deductions are applied for costs like housing and child care, the net income limit for those households stands at 100 percent of the Federal Poverty Level—$1,215 monthly for an individual and $2,500 for a family of four.
The income guidelines underline the vulnerability of EBT recipients, who rely on the benefits to meet their daily needs. The impact of EBT fraud is particularly severe on the group, the Justice Department said, as it deprives them of essential financial support and places additional stress on families already struggling to make ends meet.
New Mexico has the highest percentage of population receiving food stamps at 21 percent, while Utah has the lowest at 4.73 percent.
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