Background
Qinbin Chen participated in an international fraud scheme where he purchased Walmart gift card redemption codes from suppliers who had deceived victims. Chen hired runners to redeem these cards at Walmart stores and convert them into brand-name gift cards, which he then sold to buyers abroad. He was also charged with using illegally obtained debit card information to purchase tires. Chen was convicted by a jury on multiple counts including unauthorized access device fraud, aggravated identity theft, and money laundering.
The court’s reasoning
The court affirmed the fraud and identity theft convictions, finding ample evidence that Chen knew his suppliers obtained cards through deception and acted with intent to defraud. However, regarding the money laundering charges, the court applied the plow-back theory, which requires proof that proceeds were used to keep the scheme going. The government’s own bank statements showed the specific funds at issue sat in Chen’s accounts and were only used for incidental life expenses, not reinvestment. Consequently, the evidence was insufficient to support the substantive money laundering counts, though the conspiracy count was affirmed based on circumstantial evidence of reinvestment in other transactions.
What it means going forward
Defendants convicted of money laundering must now have the government prove that specific funds were actually reinvested into the criminal enterprise to sustain a plow-back conviction, rather than relying solely on circumstantial evidence of the defendant’s financial needs.