The Justice Department charged several people and seized more than $750,000 in cryptocurrency from a Kenyan account as part of Operation Ghostbusters, a multistate investigation into federal student aid fraud involving so-called ghost students.
The indictments mark the first arrests from the effort. Scammers use stolen identities to fill out Free Application for Federal Student Aid applications and obtain federal funding. Some stolen funds ended up in bank accounts controlled by foreign actors, according to the DOJ.
The scheme targets people who have never attended college. "These fraudsters are exploiting Americans who have never been to college before, preventing the Department of Education from cross-checking applicants," the DOJ said. Many victims reported having only high school diplomas but found themselves listed as attending institutions hundreds of miles away.
One criminal complaint filed October 20 in the District of New Jersey describes how three individuals received hundreds of deposits over five years. One person received more than $1 million linked to more than 300 fraudulent student accounts. After receiving money, they transferred large portions to Kenyan accounts belonging to two unnamed co-conspirators associated with a Kenya-based safari company.
Federal investigations have uncovered hundreds of participants and hundreds of millions of dollars in stolen funds. Investigators identified more than 830,000 potentially fraudulent ID numbers used to apply for federal student aid, connected to $130 million in aid. The DOJ recommended that the Education Department disable those IDs.
The Education Department added new fraud-detection tools to FAFSA that prevented more than $2 billion in attempted student aid fraud. Congress is considering legislation to codify those changes. Colleges have weighed new fees and other tactics to curb potential fraud.
The DOJ estimates the scale of fraud could exceed $200 million.