A complex scheme that netted more than $1 million after thieves created about 20 new identities with stolen information and used them in Suffolk County to get loans and other credit began unraveling after a single phone call to police, authorities said Wednesday.
Now 13 people, including at least 10 Long Island residents, and three corporations are facing charges in a 108-count indictment involving what Suffolk District Attorney Timothy Sini on Wednesday dubbed a "a massive, nationwide synthetic identity fraud scheme."
Suffolk Police Commissioner Geraldine Hart said the investigation her department started in August 2018 -- and grew to include local prosecutors, federal agencies and California authorities -- began with a phone call from a local bank employee with concerns about a borrower with about $20,000 in unpaid debt.
Hart said a Suffolk detective found that while the borrower used a legitimate Social Security number, it belonged to a teenager in Ohio, not the 54-year-old man who took out the loan.
The detective then reached out to other financial institutions and found similar instances of synthetic identity fraud, Hart said.
Authorities said the alleged scammers used Social Security numbers stolen from people not likely to check their credit histories, including children as young as 5, recent immigrants, the elderly, the incarcerated and even the dead, to create synthetic — or fraudulent — new identities.
The scammers used their own names and dates of birth along with the stolen Social Security numbers and random Suffolk addresses "to wrack up debt and defraud financial institutions," Sini said.
He called the indictment "historic" and said the prosecution was the first of its kind in Suffolk to target a new kind of criminal scheme.
Sini said while local losses topped $1 million dollars, authorities believe the same schemers amassed a credit limit of hundreds of millions of dollars across the country.
In the case under prosecution locally, the fraud scheme infiltrated 19 financial institutions, including local entities Bethpage Federal Credit Union, Nassau Financial Federal Credit Union, Suffolk Federal Credit Union and the formerly named Nassau Educators Federal Credit Union, according to prosecutors.
Local authorities said the investigation involved collaboration with the U.S. Social Security Administration, the U.S. Secret Service and the U.S. Postal Inspection Service, credit bureaus and police and prosecutors in Riverside County, California.
Authorities said that in order to make the ploy work, the scammers took steps to make the new identities look legitimate that included applying for phone accounts, library cards and rewards cards.
One of the schemers also would use sophisticated software to insert the synthetic identities into public databases that financial institutions use to verify information, law enforcement officials said.
From there, the schemers began fraudulently building credit for the new identities, including by adding them on as authorized users on the credit card accounts of real people, authorities said.
The scam’s alleged mastermind, Adam D. Arena, 43, of Corona, California, then created shell corporations that falsely reported the made-up identities to credit reporting agencies as if they were corporation customers to boost the credit ratings of the fake identities, law enforcement officials said.
Arena also allegedly backdated the information to try to make it look like the fake individuals had good credit histories for years.
Three corporations the California man owns face charges of acting with him to carry out money laundering, authorities said.
With fake credit histories established, the scheme's participants allegedly used the synthetic identities to get loans that weren't repaid and to max credit cards — what authorities said is known as a credit "bust out."
Court records show Arena pleaded not guilty to the indictment, which includes grand larceny and money laundering among the charges against him, after his February arrest. He is scheduled for a conference in Suffolk court in early October.
The Suffolk attorney who is listed in court records as Arena's appointed lawyer couldn't be reached at his office Wednesday.
Another of the defendants, Tremayne Smith, 44, of Mastic, appeared in a Suffolk court for an arraignment Wednesday on multiple charges that included grand larceny and falsifying business records.
Smith's appointed attorney, Daniel Sullivan, said while leaving court with his client that the man had pleaded not guilty, was put on supervised release and would return to court next month.
Authorities said other defendants, who all face grand larceny charges, were arraigned previously and that they're still seeking to arrest two more suspects.
With Cecilia Dowd
- Create a synthetic identity, using their own names and dates of birth along with stolen Social Security numbers and random Suffolk addresses.
- Legitimize it by applying for phone accounts, library cards or rewards cards and get them added to public databases that financial institutions use to verify information.
- Build credit, including through the use of shell corporations that falsely report data, sometimes backdated, that creates good credit histories.
- The identities then are used to obtain loans and credit card accounts. When the account balances are not paid, the banks often have no live individual to pursue.