10 college students lose $58K in 'IRS' scam that convinced victims to buy gift cards at Best Buy

RALEIGH -- In less than two weeks, 10 NC State University students have lost $58,000 to a scam.

One of those students is Lily Cloud. Lily is a senior civil engineering student, and she got a call from who she thought was the NC State University Police Department.

"It's the exact same number they have on their website," said Lily. "They knew my name, they knew my college, they knew all sorts of information about me, and they said there was an investigation on me."

Lily said she was told it was a fraud investigation involving the IRS.

She adds, "I was extremely terrified during this call. They said I could have gotten kicked out of the School of Engineering and that my credit score could be ruined, so they were making threats like that."

The caller demanded that she stay on the phone with him the entire time and not to tell anyone else what she was doing as the investigation was confidential, Lily said. She claims the caller told her that if she complied, things would work out in her favor when it came time to the fraud investigation.

Lily said she was told to drive from her apartment to the Best Buy on Capital Boulevard.

Once inside, she said the caller told her to buy $6,000 worth of Best Buy gift cards. After she bought the gift cards, she read the 16 digit activation codes to the scammer so he had control of the cards.

Then the caller told her since she was complying, she could head to the Durham IRS office to meet with investigators.

When she was close to the Durham office, she said the scammer then told her there was a problem and the $6,000 didn't cover it and that he needed more.

This time the caller told her to go to the Best Buy in Durham on Fayetteville Street and buy another $6,000 in gift cards.

"I'm stressing out the entire time, just freaking out that I wanted to get this done, wanting to come home," Lily said.

The scammer now had $12,000 worth of Lily's money, but it still wasn't enough.

The student said she was then told to drive to a Best Buy in Cary and buy a final $2,000 worth of gift cards, claiming that would get her out of trouble.

By this time, she was now more than four hours into the call with the scammers, and they got $14,000 worth of Best Buy gift cards thanks to Lily. She said the caller finally said that she did enough and that, "We will meet you at the IRS on Monday. We will give you a check and clear this all up."

Lily said she was told she had to destroy all of the gift cards and receipts, which she said she did.

Relieved it was over, Lily called her parents to fill them in only to learn this was all a scam.

Lily and her parents immediately called Best Buy to try and cancel the gift cards.

The problem? Since she no longer had the gift cards, it was tough to cancel them without activation codes. Eventually, Best Buy was able to put a stop to $2,000 out of the $14,000 worth of gift cards.

Lily is still out $12,000.

"It's really financially devastating," she said.

Besides being in financial ruin, Lily said this ordeal has been extremely embarrassing.

Looking back, she said there were so many red flags but she said the caller was so good at impersonating the NC State police, she thought she was in real trouble and that's why she followed the instructions for more four hours.

As it turns out, the scammer was just able to manipulate their phone number to make it appear they were calling from the department.

Lily is sharing her story in hopes that no other students fall victim to this scam.

"They are targeting kids that are just trying to better themselves, and they are coming in with personal information attacking them and threatening them."

Officials with the NC State police said they are working with other agencies, specifically the Raleigh Police Department and the IRS, to investigate the crimes.

The IRS has assigned an investigator from the Treasury Inspector General for Tax Administration's Office to assist the NC State Police Department with jurisdictional issues. He adds, leads have been developed, and investigators are making progress, but as it's an ongoing investigation, and they cannot discuss those leads at this time.

A safety alert did go out to NC State University students this week.

Red flags for this scam involved the caller demanding payment with gift cards from Best Buy or iTunes, pre-paid debit cards, Western Union, MoneyGram or bank deposits.

Also, the IRS will not share information with local law enforcement agencies, and the IRS will not threaten arrest over the phone for unpaid taxes. If you get one of these calls, hang up.

Here are more tips from the IRS.