Federal authorities have uncovered an elaborate organized crime ring they say recruited some 700 immigrants from the former Soviet Union to defraud banks and other creditors of more than $80m.
According to documents filed in US District Court in Denver, the organizers hired the immigrants to be pawns in what's known as a "bust out" scheme, in which the identity and credit line of a business are used to get loans by an otherwise non-creditworthy borrower who has no intention of repaying.
Federal authorities in Denver identified 16 so-called "straw buyers," at least two of whom were taken into custody last week. In all, they said some 700 people participated in the scheme, which cost creditors $80m.
The most common form of the scheme involves the making of fraudulent loan applications, such as those allegedly submitted by 23-year-old defendant Nadezda Nikitina. A few months after legally entering the US in April 2007 on a K-1 visa, she stated in a credit card application she completed online that she had been employed at her current job for five years and made $180,000 per year. Citibank promptly mailed her a card with a $25,000 limit.
Nikitina received five cash advances on the card for a total of $24,500. A few weeks later, she sent Citibank a check for $25,000. Although the check was returned for insufficient funds, the fraudulent payment caused Citibank to temporarily increase her credit line. The total financial loss to the bank was calculated at $69,940.94.
Nikitina and another suspect, Natallia Vishnevskaya, 26, were remanded into the custody of the federal marshal, according to court documents. They are scheduled to appear in court on Wednesday. They are charged with one count each of bank fraud and one count of submitting a false and fraudulent application. Two other suspects were arrested or summoned but were later taken to a medical facility, according to news reports.
While fraudulent loan applications appear to be the most common form of the bust out scheme, there were other variations. One involved the formation of a fictitious shell company for the sole purpose of becoming an authorized credit card processor. That allowed the perps to directly charge credit cards held by the straw buyers.
Yet another variation involved the repeated refinancing of vehicles held by the straw buyers. After buying the vehicle using illicit proceeds, the owner applied for multiple titles for it. The owner then used the duplicates to obtain financing from different banks.