Five indicted in “ghost student” federal loan fraud, DOJ says

The Department of Justice’s National Fraud Enforcement Division announced indictments Thursday in what it called a large‑scale student‑loan fraud scheme involving Kenyan nationals. Five defendants allegedly created fraudulent Free Application for Federal Student Aid, or FAFSA, accounts using stolen identities of U.S. citizens to enroll “ghost students” in educational institutions, according to the findings from the division’s Operation Ghostbusters initiative.

Although these fake students never attend classes, fraudsters use artificial intelligence to complete coursework and simulate attendance, the DOJ said. After the grants were distributed, the funds were diverted to bank accounts controlled by foreigners and facilitated by U.S.-based money mules, the agency said.

Assistant Attorney General Colin M. McDonald of the agency’s fraud division said this ghost student scheme affects low-income Americans and all American taxpayers. McDonald said authorities seized more than $750,000 in cryptocurrency tied to this scheme through a network associated with Kenyan nationals.

What is the scope of the fraud? Investigators suspect this activity has been happening since at least 2021. So far the FBI has identified more than $32 million in losses, but federal authorities estimate the scale of the fraud to be well over $200 million. Operation Ghostbusters continues to partner with Kenyan law enforcement to recover stolen tax dollars, the DOJ said.