USDA Inspector General John Walk told Congress on Thursday that fraud inside the Supplemental Nutrition Assistance Program has expanded into a sophisticated threat involving stolen benefits, corrupt retailers, skimming schemes, and organized criminal activity.
Walk testified on June 25 in Washington before a House Oversight subcommittee during a hearing focused on waste, fraud, and abuse in SNAP. He said investigators have found cases where food assistance benefits were trafficked for cash and then linked to illegal drugs, guns, and broader criminal networks.
Fraud Claims Center on EBT Theft
The Walk said criminals are increasingly exploiting Electronic Benefit Transfer cards, the payment cards used by SNAP recipients to buy eligible food. Fraudsters can steal card information through skimming devices, clone the cards, and drain accounts shortly after monthly benefits are loaded.
That form of theft can hit families quickly. A recipient may not discover the loss until a card is declined at a grocery store. By then, the monthly balance may already be gone.
California Case Linked Fraud to Guns and Drugs
The most serious example cited during the hearing involved Operation Mic Drop, a Southern California investigation tied to Mike’s Market in San Diego’s Mountain View neighborhood. The case involved EBT fraud, narcotics sales, and firearms-related crimes. Prosecutors said store employees allowed customers to use EBT cards to receive cash, which was then used to buy drugs from gang members connected to the store.
The investigation produced convictions for 22 defendants. Sentences ranged from probation to 15 years in state prison, and the court ordered $2 million in restitution.
Prosecutors said Operation Mic Drop uncovered connections between food assistance benefit fraud and narcotics sales. They also said gang members used money from the scheme to buy guns.
SNAP Remains a Major Federal Program
SNAP helps low-income households buy groceries through monthly benefits. The program is funded by the federal government and administered by states under federal rules.
The program reaches millions of households each month. Federal data show that SNAP served an average of 41.7 million people per month in fiscal year 2024.
Improper Payments Add Political Pressure
Lawmakers also focused on improper payments, a category that includes overpayments, underpayments, and payments that should not have been made. Improper payments are not always fraud, but they signal weaknesses in program controls.
Federal reviewers estimated 11.7% of SNAP benefits paid in fiscal year 2023 were improper. That represented about $10.5 billion. Those figures have become a central argument for stronger oversight. Supporters of tougher controls say taxpayer money is being lost before investigators can recover it. Critics warn that broad crackdowns can create barriers for eligible families if reforms are poorly designed.
Retailers Face Renewed Scrutiny
Retailers are a major focus of federal SNAP enforcement because they are the point at which benefits are converted into payments. Most authorized stores comply with the law, but dishonest retailers can create large-scale fraud networks.
A corrupt store can ring up fake purchases, exchange benefits for cash, or help drain cards at a discount. Because retailers process repeated transactions, a single bad actor can move large sums of money through the system.
The Walk said trafficking remains a serious concern because store-based fraud can connect public benefits to cash markets. Once benefits become cash, investigators say the money can move into drugs, weapons, or other illegal activity.
Card Security Gap Draws Attention
A major concern is the continued use of magnetic stripe EBT cards in many states. Those cards are easier to skim than chip-enabled cards used widely in banking and retail payments. Criminals can capture card data and PINs through compromised terminals. They can then create cloned cards and empty accounts after benefits are loaded.
That weakness creates a direct risk for recipients. Families who depend on SNAP may lose food money because the payment system has not kept pace with common fraud tools.
State Data Fight Continues
The hearing also touched on a growing dispute over access to state SNAP data. Federal officials have pushed for more information to detect duplicate enrollment, suspicious patterns, and possible fraud across state lines.
States administer SNAP applications and eligibility decisions, while federal agencies fund the benefits and oversee program integrity. That structure can create gaps when investigators need to compare data across jurisdictions.
The House Oversight subcommittee has not announced final legislation tied to Thursday’s hearing. The testimony is expected to feed into broader discussions over SNAP oversight, benefit security, and state data sharing.
The next phase will depend on whether Congress moves toward new SNAP integrity requirements, stronger EBT card security rules, or expanded data-sharing authority for federal watchdogs.
