DOJ Makes Arrests in FAFSA “Ghost Student” Scheme

The Justice Department said Thursday that it had charged several people and seized more than $750,000 in cryptocurrency from a Kenyan account as part of a nationwide investigation into federal student aid fraud. 

The indictments and arrests are the first results from what the agency calls Operation Ghostbusters—a multistate effort to crack down on the so-called ghost students haunting colleges. The schemes have cost institutions millions of dollars annually as scammers fill out aid applications with stolen identities to obtain federal funding. The DOJ said in a news release some of the stolen funds ended up in bank accounts controlled by foreign actors. The seized cryptocurrency belonged to a Kenyan national who investigators say is linked to the fraud.

“These fraudsters are exploiting Americans who have never been to college before, preventing the Department of Education from cross-checking applicants,” according to the release. “Many known victims have reported attaining only high school diplomas—and are shocked by their faked attendance at an institution hundreds of miles away.”

The Education Department has added new fraud-detection tools to the Free Application for Federal Student Aid, which officials say has prevented more than $2 billion in attempted student aid fraud. Congress is considering legislation to codify those changes. Meanwhile, colleges have weighed new fees and other tactics to curb potential fraud.

Investigators said the release that the scale of the fraud could exceed $200 million.

The release noted that that this round of indictments is just the start. Federal investigations have “already uncovered hundreds of participants and hundreds of millions of dollars in stolen funds, sending approximately 50 referrals to 26 FBI field offices across the country.” They’ve also identified more than 830,000 potentially fraudulent ID numbers that individuals use to apply for federal student aid, that were in turn connected to $130 million in aid. The DOJ recommended that ED disable those IDs.

One of the complaints unveiled Thursday and filed Oct. 20 in the District of New Jersey offers a glimpse into how federal investigations think the FAFSA fraud scheme works.

According to the criminal complaint, three individuals who live in New Jersey received “hundreds of deposits” of federal money over a five-year period. One person received more than $1 million in deposits that were linked to more than 300 fraudulent student accounts. 

After receiving the money, they would then transfer a large portion of the funds to Kenyan accounts, according to the complaint, which belonged to two unnamed co-conspirators who investigators say were associated with a Kenya-based safari company. 

“If you steal American identities, if you steal taxpayer dollars, if you exploit programs meant to help students build a future—we will find you,” said Colin M. McDonald, assistant attorney general for the Justice Department’s National Fraud Enforcement Division, in the release. “Whether you are in Nebraska, New Jersey, Virginia or Nairobi, we will pursue you.”