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Sixteen people have been charged for operating a fraudulent telemarketing scheme that involved losses of over $20 million to more 290 victims in 46 states and Canada, including Michigan, announced United States Attorney Barbara L. McQuade.
McQuade was joined in the announcement by Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office.
According to the first superseding indictment, the telemarketers operated from call centers in Florida and New York. The telemarketers made unsolicited calls to individuals across the country offering to sell homes in Detroit. The telemarketers lied about the values of the homes, and told investors that they were purchasing bank-owned homes that previously had mortgages worth many times more than the current sales price. In reality, the homes were oftentimes acquired for no more than $500 before quickly being sold by the telemarketers to victims for between $7,500 and $15,000. After an investor agreed to purchase one home, the telemarketers caused the investor to believe that it was quickly resold to a hedge fund or foreign buyer for a substantial profit. In reality, the property was transferred to a shell company controlled by the telemarketers for no consideration and there were no profits. Based on these sham transactions, which caused investors to believe that there was an established process and market for flipping homes in Detroit, numerous investors purchased multiple additional homes from the telemarketers. After purchasing a substantial number of homes, the investors had difficulty contacting the telemarketers and eventually all communication ceased. The telemarketers utilized aliases and frequently changed the name of their company to avoid disgruntled investors and law enforcement.
The following individuals were charged:
The charges include a conspiracy to commit mail and wire fraud, 15 underlying wire fraud counts, and a conspiracy to commit international money laundering. Each of the seventeen counts in the first superseding indictment carries a potential sentence of 20 years’ imprisonment. The FBI arrested numerous individuals in Florida on Friday, November 21, 2014, prompting the unsealing of the charges.
"This nationwide telemarketing fraud not only caused millions of dollars in losses to victims of the scheme, but it also contributed to blight in Detroit neighborhoods,” McQuade said. “Thousands of homes were left to fall into decay as a result of these individuals using Detroit real estate as a commodity to accomplish their fraud.”
“The perpetrators in this case stole millions of dollars from hundreds of victims,” stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. “However, they did more than steal money - their greed and fraud compounded the proliferation of vacant homes left for ruin in far too many Detroit neighborhoods. The FBI is committed to rooting out and bringing to justice those who would commit crimes of this nature and act against the interests of our communities."
Gregory Swarn was previously arrested in early November after he fled overseas utilizing a fraudulent passport. The U.S. Department of State, Diplomatic Security Service (DSS), with the assistance of the FBI, was able to locate Swarn in Thailand. In cooperation with DSS, Thai officials arrested Swarn and deported him to the United States to face charges for his passport fraud and the telemarketing fraud. At the time of his arrest, Swarn was on DSS’s Most Wanted List. Erez Arsoni likewise fled overseas and is currently on DSS’s Most Wanted List.
During the execution of search warrant and seizure warrants, the FBI has seized over $1 million in proceeds of the fraud.
The case was investigated by the FBI. The case is being prosecuted by Assistant U.S. Attorney Louis Gabel with the United States Attorney’s Office for the Eastern District of Michigan in Detroit.An indictment is only a charge and is not evidence of guilt. Every defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.