GREAT VALLEY, N.Y.–A man connected with synthetic identity fraud schemes at banks and credit unions in Suffolk County has pleaded guilty.
Synthetic identify fraud has been identified as a growing risk at credit unions and financial institutions, especially as an increasing amount of business is done virtually.
Adam Arena of Great Valley, N.Y., pleaded guilty to several counts of grand larceny, criminal possession of a forged instrument, money laundering and scheme to defraud, according to the Suffolk County District Attorney, Tim Sini.
“Mr. Arena played a key role in this national fraud ring,” He opened shell corporations for the sole purpose of improving credit scores for these fake identities, allowing them to borrow large amounts of money in loans that they would never pay back,” Sini said in a written statement as reported by the Long Island Business News. “Our message to fraudsters is that no matter how sophisticated you think your operation is, you can’t outsmart the law. The prosecutor and investigators on this case left no stone unturned in unraveling this scheme, and today’s plea ensures that these perpetrators are held accountable.”
Corporate defendants GFS Auto Sales, LLC; SBC Software, LLC; and ADA Auto Group each pleaded guilty to money laundering, Long Island Business News reported.
According to prosecutors, Arena is expected to be sentenced to an indeterminate sentence of four to 12 years in prison. Arena and the corporations will also be required to pay restitution in the amount of approximately $523,000 through restitution judgment orders to the financial institutions impacted by this scheme.
20 Synthetic Identities
Investigators found that more than 20 synthetic identities had been created and used in Suffolk County to fraudulently obtain loans and credit card accounts from 19 different financial institutions, Long Island Business News reported.
Under the scheme, participants created synthetic identities by associating a stolen Social Security number with a different name, address and date of birth, officials said. The stolen Social Security numbers belonged to individuals with no existing credit history or those who were unlikely to be monitoring their credit history, such as children, recent immigrants, deceased individuals, elderly individuals, and incarcerated individuals.
According to prosecutors, Arena created shell corporations that then falsely reported the synthetic identities to the credit reporting agencies as though they were customers of the corporations, providing the synthetic identities with corporate tradelines that further boosted their credit ratings, Long Island Business News reported.
Arena fraudulently backdated the information to make it appear as though the synthetic identities had good credit histories over the course of several years.
Numerous Steps Taken
Officials said that those involved in the scheme took numerous steps to make the synthetic identities appear legitimate and to fraudulently build credit for the synthetic identities, including adding the synthetic identities as authorized users on an existing individual’s credit card, authorities explained.
Once the synthetic identities accumulated positive credit reports, participants in the scheme fraudulently obtained loans and credit card accounts from financial institutions using those synthetic identities, according to the DA. The accounts would be used to the maximum amount allowed and then the balances on the accounts were never paid, a scheme known as a credit “bust out.”
According to the DA’s office, Arena and the corporate defendants were charged as part of a 108-count indictment charging 13 individuals and the three corporations in February 2020.