How a phony car loan scam bilked credit unions out of millions

A group of fraudsters cheated banks and credit unions by filing paperwork for car loans on vehicles that didn’t exist.

Continue Reading Below

The scheme sought more than 80 auto loans, attempting about $2.7 million in fraud and obtaining about $1.7 million before the seven scammers were caught, according to the U.S. Attorney’s Office for the Northern District of Georgia.

The group started by incorporating businesses that sounded like car dealerships, with names like “Premier Luxury Motors” and “Platinum Motors Auto Sales,” according to U.S. Attorney Byung J. “BJay” Pak. But the businesses were actually shell corporations with no employees, cars or dealership licenses, he said.

They then recruited people to apply for car loans from banks and credit unions, Pak said. The loan applications would claim to be purchasing a car from one of the fake companies, and the fraudsters would supply phony vehicle purchase orders.

Once a loan was approved, the scammers would hold the money in an account in the name of one of their companies before splitting the money among themselves, Pak said. The bank would never be paid back, and would also be left with no car to repossess.

“These defendants’ ‘creative financing’ company specialized in ‘auto loan conversions,’ which was simply fraud,” Pak said. “This scam was designed to trick lenders, which in this case were mostly credit unions, into granting loans for sham car sales.”

The FBI and U.S. Postal Inspection Service investigated the scheme, which authorities said ran for about four years.

Six of the defendants have been sentenced so far, with two receiving home detention and the others getting prison sentences ranging from about a year to four years and nine months. All six have been ordered to pay restitution. A seventh defendant is awaiting extradition from the United Kingdom.

“Bank fraud is not a victimless crime and these defendants will now have time to reflect on their choice to obtain these fraudulent auto loans,” said Chris Hacker, special agent in charge of FBI Atlanta. “The FBI treats these types of financial crimes very seriously and warns anyone considering this type of criminal activity to also consider the fate of these defendants face as a deterrent.”