Topline:
Two men have been indicted by a federal grand jury for allegedly running an $8.5 million bait-and-switch scam through Airbnb and similar rental platforms in cities like Los Angeles, Malibu, and Marina Del Rey, the Justice Department announced Thursday.
Why it matters: Shray Goel, 35, of Miami, and Shaunik Raheja, 34, of Denver, are accused of defrauding thousands of people through misleading listings and bogus cancellations in California and nine other states, which included discrimination against Black people.
Why now: Both men have been charged with conspiracy to commit wire fraud and 13 counts of wire fraud. Goel is also charged with two counts of aggravated identity theft.
The backstory: In 2018 and 2019, Goel and Raheja booked more than 10,000 listings through Airbnb, receiving more than $7 million from those reservations, according to the Justice Department. They received an additional $1.5 million from other and occasionally conflicting reservations on Vrbo.
What's next: Both men are expected to be arraigned in U.S. District Court in L.A. later this month, but their court dates have not yet been set.
Go deeper: ...to learn more about the allegations.
Two men have been indicted by a federal grand jury for allegedly running an $8.5 million bait-and-switch scam through Airbnb and similar rental platforms in cities like Los Angeles, Malibu, and Marina Del Rey, the Justice Department announced Thursday.
Shray Goel, 35, of Miami, and Shaunik Raheja, 34, of Denver, are accused of defrauding thousands of people through misleading listings and bogus cancellations in California and nine other states, which included discrimination against Black people.
About the allegations
Goel and Raheja allegedly owned a short-term property rental business that operated under several names, including Abbot Pacific LLC, according to the Justice Department.
They managed nearly 100 properties across the country, including in Denver, Chicago, Nashville, and Austin. To start the scam, the men would allegedly create multiple listings for the same property on Airbnb and Vrbo in order to double-book guests.
They are accused of then coming up with last-minute fake excuses, often blaming plumbing problems, to cancel on their overbooked guests or trick them into moving to inferior accommodations.
United States Attorney Martin Estrada told LAist Goel and Raheja weren’t just operating on greed, but racial prejudice as well.
“They made decisions in terms of which renters to cancel on, in part based on their race,” Estrada said. “They tried to avoid renting to guests who they thought were Black.”
They allegedly profited off the scam by running a secret bidding war. Each property would be listed with several different prices for the same night, and the men are accused of renting it to the highest bidder while canceling or switching the lower-paying guests.
This scheme also allegedly helped the men keep all of their properties full. Goel and Raheja are accused of using popular properties as bait, and then steering the overbooked guests to less popular listings in the same area at the last-minute.
In some cases, the properties didn’t exist at all. They would allegedly use fake addresses to create more listings and evade local laws regulating short-term rentals.
In 2018 and 2019, Goel and Raheja booked more than 10,000 listings through Airbnb, receiving more than $7 million from those reservations, according to the Justice Department. They received an additional $1.5 million from other and occasionally conflicting reservations on Vrbo.
“This particular scam is one of the more egregious we've seen in this double-booking, bait-and-switch type of model,” Estrada added.
In 2019, a Vice reporter wrote an article about their experience being scammed by an Airbnb listing in Chicago. That investigation led them to Goel, Raheja, and Abbot Pacific LLC. The morning after the article was published, Vice added a footnote that said the FBI contacted them about the claims.
What’s next
Both men have been charged with conspiracy to commit wire fraud and 13 counts of wire fraud. Goel is also charged with two counts of aggravated identity theft.
Goel was initially charged last month, and the Justice Department said he was arrested in Florida on Dec. 27. He was released on bond the next day, and Raheja was later added as a defendant.
Both men are expected to be arraigned in U.S. District Court in L.A. later this month, but their court dates have not yet been set.
The FBI and the Federal Deposit Insurance Corporation - Office of Inspector General are investigating this case, with assistance from the Federal Housing Finance Agency - Office of Inspector General.
The Justice Department said both Airbnb and Vrbo are cooperating with the government. Airbnb told LAist the accounts that were identified to be connected to Goel and Raheja were removed from their platform in 2019.
“Airbnb is built on trust, and bad actors have no place in our community,” an Airbnb spokesperson said in a statement. “We supported the US Attorney’s Office and the FBI throughout their investigation to help ensure accountability, and we are thankful to them for their work. We have taken multiple steps to strengthen our defenses against deceptive behavior, including measures like identity and listing verification which we believe will help further deter already rare instances of this type of activity.”
Airbnb is rolling out a new listing verification system throughout the year.
To verify a listing, hosts will need to take several photos or videos from different parts of the property, according to Airbnb. While this adds safeguards, the company said this “is not a guarantee that a listing is what the host claims it to be.”
LAist has reached out to Goel’s and Raheja’s attorneys, but did not receive an immediate response.
