‘Operation Ghostbusters’ Uncovers ‘Ghost Student’ Loan Scam, Leads to Five Indictments

A newly uncovered type of fraud known as “ghost students” has prompted a joint response from the Justice Department, the White House task force, the Department of Education, and the FBI, according to Assistant Attorney General Colin McDonald of the DOJ Fraud Enforcement Division.

McDonald appeared at a press conference with Department of Education Undersecretary Nicholas Kent, First U.S. Attorney for the Eastern District of Virginia Theo Stamos, FBI Criminal Division Assistant Director Heith Janke, and Andrew Ferguson, vice chair of the Fraud Task Force, to unveil a nationwide probe dubbed “Operation Ghostbusters.”

He described the effort as a coordinated government push to shut down the scheme.

The Fraud Division is working with U.S. attorneys offices across the country, the FBI, the Department of Education Office of Inspector General, U.S. Customs and Border Protection, the State Department, DOJ's Criminal Division, and other partners to stop this fraud.

This investigation began with agents at the FBI Richmond Field office, and prosecutors right here at the Eastern District of Virginia.

It has now expanded nationwide. There are more than 40 open cases across 26 FBI field offices and more than 20 U.S. attorneys offices resolved to stop this scam.

Operation Ghostbusters is a nationwide investigation into a large-scale student-loan fraud scheme in which criminal actors created fraudulent Federal Student Aid (FAFSA) accounts using stolen U.S. citizen identities to enroll “ghost students” in educational institutions.

“This is the first international seizure of its kind in Kenya. 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. Whether you are in Nebraska, New Jersey, Virginia, or Nairobi, we will pursue you.” -@AAGMcDonald

McDonald said the operation has already led to the arrest of five international fraudsters from Kenya. He added that the scheme is the kind of fraud President Trump, Vice President Vance, and the White House task force are determined to defeat.

WATCH:

Throughout the year, Americans submit a FAFSA application with the Department of Education, hoping to receive the aid or loans needed to attend college. For many, that application is their only opportunity. The American people understand this and help fund federal student aid programs so students and families can afford college. But every year, alongside those honest applicants, fraudsters submit thousands of bogus student loan applications, targeting taxpayers and victims alike.

Operation Ghostbusters is working to stop them.

Let me briefly describe how this scheme works.

First, criminals steal the identities of real Americans. They specifically target Americans who haven't attended college. They use those stolen identities to create ghost students to apply to colleges across the country. Next, they apply for federal student aid using those same stolen identities. And if successful at duping the Department of Education, ED then sends the aid money to the college where the ghost student is enrolled. After tuition and fees are deducted, the leftover federal funds are deposited directly into bank accounts controlled by fraudsters. And in a flash, the money vanishes, often overseas in places like Kenya.

As RedState colleague Ben Smith reported, the Treasury Department was among the first agencies to warn that the scheme was underway.

Foreign and domestic fraud rings are stealing federal student aid by creating fake students, hijacking real identities, and using artificial intelligence to keep phony applicants enrolled long enough to collect taxpayer-funded refunds.

RedState's Ward Clark also wrote about the Treasury warning and remarks from Secretary Scott Bessent not long ago.

McDonald said Kenyan nationals have become particularly adept at draining American taxpayer dollars:

And today, we are announcing charges against five defendants and the seizure of more than $750 thousand dollars of cryptocurrency tied to this scheme and laundered through a network associated with Kenyan nationals. This is the first international seizure of its kind in Kenya.

WATCH:

.@AAGMcDonald gives an update on Operation Ghostbusters, a nationwide investigation into federal student loan fraud:

“Today, we are announcing charges against five defendants and the seizure of more than $750,000 in cryptocurrency tied to this scheme, and laundered through a network associated with Kenyan nationals... Whether you’re in Nebraska, New Jersey, Virginia, or Nairobi, we will pursue you and bring you to justice. The American people deserve better than ghost students, fake applications, and stolen aid.”

In Nebraska, a grand jury has indicted Francis Mogambi, a Kenyan national, on charges of theft of government money and aggravated identity theft. According to court documents, Mogambi allegedly worked with associates in Kenya to steal U.S. identities, enroll victims as students, redirect federal aid payments, keep a share for himself, and send the rest to co-conspirators in Kenya.

In New Jersey, Mabed Patricia Utate-Alberto, Patricia Arisleydi Perez, and George Arturo Alfau Mendez are charged with conspiracy to commit wire fraud. They allegedly acted as money mules in a scheme involving hundreds of ghost students and more than 1.3 million in proceeds.

Prosecutors allege that money was sent overseas, including to individuals connected to a Kenya-based safari business used as a cover. We are also acting urgently with Secretary McMahon and the Department of Education to identify and shut off fraudulent accounts to stop this money from going to the fraudsters.

WATCH:

The methods used in these schemes are becoming more sophisticated. Some use artificial intelligence to complete college applications and coursework so it appears the ghost student is actually doing the work. Some even create the appearance of a fake student in an online classroom to trick schools into believing that a real person is present.

The goal is to keep the ghost student enrolled as long as possible, semester after semester, while stealing money from taxpayers. These are not isolated mistakes; they are organized fraud on a large scale.

But lost dollars do not tell the full story. The full story includes the experience of an American citizen who graduated high school and went straight to work to support his family. He never applied to college, never enrolled in classes, and never requested federal student aid. Then one day, he learns that his name is tied to a loan from a school hundreds or thousands of miles away. He did not attend the school, did not receive the education, and did not get any money. His identity was stolen, his credit is now at risk, and his name is on the bill.

McDonald closed by saying:

The American people deserve better than ghost students, fake applications, and stolen aid. They deserve student aid programs that serve students, protect taxpayers, and punish criminals. This is not the end of Operation Ghostbusters, this is just the beginning.

McDonald said OIG investigators believe the fraud has been taking place since at least 2021. RedState previously reported that Minnesota and California are major hotspots, and he added that nearly one-third of California community college applications submitted in 2024 were reportedly flagged as fraudulent.

This remains an ongoing story, and updates will be provided as warranted.