Justice Department Charges Five in ‘Ghost Student’ Aid Fraud Crackdown, Seizes $750,000 in Crypto

The Justice Department announced charges against five people on October 29 in the first cases from Operation Ghostbusters, a nationwide investigation into a student aid fraud scheme that prosecutors say used stolen American identities to enroll students who never existed and divert their federal aid.

According to the department, the scheme ran since at least 2021. Criminal actors filed federal student aid applications in the names of real people, enrolled the fake students at colleges, and sent the aid refunds to bank accounts controlled by foreign actors, with help from money handlers based in the United States.

How colleges spotted the fraud

Colleges and universities raised the alarm after aid payments went to bank accounts opened in names that did not match the people who had applied, according to the Justice Department. The students behind those applications had never attended the classes the aid paid for. In some cases, the department said, the actors used artificial intelligence to place fake students in online classrooms and submit coursework written by AI, to keep the money flowing.

Assistant Attorney General Colin McDonald said at an October 29 news conference that perpetrators are increasingly using AI to create the fake students, fill out college applications and complete coursework. “These are not isolated errors. This is organized fraud at scale,” McDonald said. In California alone, about one-third of community college applications submitted in 2024 were flagged as fraudulent, McDonald said.

Five defendants in three states

In New Jersey, Mabed Patricia Utate-Alberto, Patricia Arisleydi Perez and George Arturo Alfau Mendez are accused of conspiring with individuals in Kenya to obtain more than $1 million in federal aid funds. They are said to have taken a cut of the money before transferring the rest overseas to co-conspirators in Kenya. The Justice Department said it plans to pursue charges against two co-conspirators associated with a purported Kenyan safari company that received the stolen money.

In Nebraska, Francis Mogambi, a Kenyan citizen who entered the United States after winning the diversity visa lottery in 2024, has been charged with five counts of theft of government money and five counts of aggravated identity theft. Court documents say Mogambi tried to recruit another person into the scheme and claimed he was earning $2,000 per week.

In a separate case in Virginia, an unnamed Kenyan national was charged with conspiracy to commit wire fraud and student aid fraud. Prosecutors say he obtained almost $1.5 million in aid disbursements before transferring at least $1.3 million to accounts in the United States and Kenya.

Scale of the investigation

Investigators have identified more than 830,000 potentially fraudulent federal student aid accounts, with more than $130 million at stake, according to the Justice Department. Estimates place the scale of the fraud at over $200 million. The investigation now covers more than 40 open cases across 26 FBI field offices and more than 20 U.S. attorneys’ offices. The FBI said it has identified more than $32 million in losses in similar ghost student schemes, with millions more suspected.

Investigators also seized more than $750,000 in cryptocurrency from a Kenyan national connected to the fraud, the first international seizure of its kind in Kenya, according to the department. “Every dollar that falls into the hands of a fraudster is a dollar that will not go to a student in need,” said Nicholas Kent, under-secretary for the Department of Education. McDonald said the first round of charges is “just the beginning.”

The cases were filed in federal courts in New Jersey, Nebraska and Virginia, according to the Justice Department.

Reporting based on coverage by USA Today and ICLG.