BREAKING: Massive Fraud Bombshell: Smoke Shops and Bodegas Caught Processing EBT Cards for Drugs and Alcohol Across New York City (VIDEO)

The O’Keefe Media Group on Wednesday released undercover video showing smoke shops and bodegas across New York City processing EBT cards for drugs and alcohol.

OMG released part one of the latest sting, dubbed, “Fraud Is The New Dope” on Wednesday.

NYC clerks were caught swiping the EBT card for illicit substances.

Per the OMG:

We went undercover inside smoke shops and bodegas across New York City to answer a simple question: Would retailers accept taxpayer-funded EBT benefits to pay for alcohol or drugs?

Store after store attempted to process EBT cards for kratom, a psychoactive substance that is not eligible for purchase with SNAP or EBT benefits. One clerk attempted to process the purchase as “EBT Cash.” Another processed it as “EBT Food”, treating kratom as if it were groceries.

Federal law 7 CFR 278 and 7 U.S.C 2012 prohibits retailers from accepting SNAP or EBT benefits for non-food items, including drugs, alcohol, and tobacco. According to the investigation, these transactions may violate federal SNAP regulations, New York State regulations, and the USDA SNAP Retailer Agreement.

To verify the rules, I called the number on the back of the NY EBT card. An EBT representative confirmed that drugs cannot be purchased directly with an EBT card. The representative also acknowledged that recipients who withdraw “EBT Cash benefits” can spend that cash however they choose, including on drugs or alcohol.

The investigation uncovered even more. One smoke shop provided a receipt bearing the name and address of an entirely different business. When we tracked down that business, employees said they had no connection to the smoke shop, proving that a cloned payment terminal may have been used to disguise the transactions. We discovered that the legitimate business was unaware its credentials were being used. This is consistent with the use of a cloned terminal, involving transaction laundering or merchant identity fraud under 18 U.S.C. 1343.

When we confronted those involved, they denied the transactions had occurred. Moments later, members of our team were confronted outside the store, and one individual threatened to shoot us.

How much taxpayer money is being diverted through fraud in the EBT system?

If you’ve witnessed fraud in your community or want to help expose it, email tips@okeefemediagroup.com or message us securely on Signal: 914-491-9395.

WATCH:

FRAUD IS THE NEW DOPE PART 1: NYC Clerks Caught Undercover Processing EBT Cards For Drug & Alcohol Purchases As “EBT Cash” & “EBT Food”

“The [EBT] Cash Can Use it. 100%.”

“I did EBT Food.”

“You’re gonna be chilling with the aliens [Getting So High].” pic.twitter.com/RLaeLCBVYb

— James O’Keefe (@JamesOKeefeIII) July 29, 2026

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