The Justice Department says the masterminds used super intelligence to place fake students in classrooms to keep federal student loan funds flowing.

The US Department of Justice says it has uncovered a large-scale student financial aid fraud scheme that allegedly diverted millions of dollars intended for American students through a network linked to Kenyan nationals.

Assistant Attorney General Colin McDonald said the National Fraud Enforcement Division and its agency partners visited Kenya in September 2026 and seized more than $750,000 (Sh97.44 million) from a cryptocurrency account belonging to a Kenyan national allegedly connected to the scheme.

"This is the first international seizure of its kind in the Fraud Division’s history," he said.

McDonald said two Kenyans living in Nebraska and New Jersey were among five suspects facing charges over an alleged scheme involving the creation of fraudulent Federal Application for Federal Student Aid (FAFSA) accounts using stolen identities of American citizens.

"The Department is charging five defendants and announcing the seizure of more than $750,000 in cryptocurrency tied to this scheme through a network associated with Kenyan nationals," McDonald said.

"Whether you are in Nebraska, New Jersey, Virginia, or Nairobi, we will pursue you."

"We are sending a clear message: student aid belongs to real students, the data always leaves a trail, and we will follow it wherever it leads,” added First Assistant Attorney for the Eastern District of Virginia, Theophani Stamos.

The department said the scheme was uncovered through a nationwide investigation dubbed Operation Ghostbusters, which exposed an alleged network of fraudsters exploiting the federal student aid system since 2021.

According to the Justice Department, the suspects stole the identities of American citizens and used the details to create fraudulent FAFSA accounts, enrolling fictitious students in colleges and universities.

The applications allegedly triggered the disbursement of federal student aid refunds into bank and other financial accounts controlled by the suspects rather than the actual students.

The department said the fictitious students never attended the institutions or classes for which the financial aid was awarded.

"Instead, using super intelligence, fraudsters place 'ghost' or fake students in classrooms to keep federal student loan funds flowing. Fraudsters even use super intelligence to complete required coursework at schools to maintain the 'ghost student' scam," the Justice Department said.

The department said some of the people whose identities were allegedly stolen had only attained high school diplomas and were shocked to discover that they had supposedly enrolled in institutions hundreds of miles away.

The proceeds were allegedly channelled through multiple bank accounts and financial transactions, with some of the money transferred to co-conspirators in Kenya.

Two Kenyan co-conspirators have been linked to the alleged theft of $1.5 million (Sh194.88 million) in Federal Student Aid funds between March 2021 and at least January 2026, alongside three alleged money mules based in the US.

Another Kenyan is facing multiple charges in Virginia over an alleged conspiracy to steal more than $1.4 million (Sh181.89 million) in student aid.

According to the Justice Department, the defendant allegedly acted as a US-based money mule, using multiple bank accounts across several financial institutions to receive more than 700 student aid refund deposits totalling approximately $1,439,548 (Sh187.03 million).

The defendant allegedly carried out thousands of wire transfers and money service business transactions, resulting in at least $1.3 million (Sh168.90 million) being transferred to accounts in the US and Kenya.

In the District of Nebraska, another Kenyan is being held in detention pending trial on five counts of theft of government money and five counts of aggravated identity theft.

The Justice Department said the suspect arrived in the US on May 15, 2024, after winning the Diversity Visa lottery and was issued a DV1 visa and a Permanent Resident Card.

According to the indictment, between November 2025 and May 2026, he allegedly worked with associates in Kenya to steal the identities of American citizens and use them to fraudulently enrol fictitious students in educational institutions.

He allegedly redirected the resulting financial aid refunds to himself, retaining 30 per cent of the proceeds and sending the remainder to his co-conspirators in Kenya.

McDonald said court documents showed that the suspect disclosed details of the alleged conspiracy while attempting to recruit another individual into the scheme.

He allegedly told the prospective recruit that he earned $2,000 (Sh259,840) a week and needed a business through which he could cash larger cheques without paying taxes.

The investigations began after community colleges and universities across the US identified fraudulent FAFSA applications that had resulted in student aid refunds being deposited into bank and other financial accounts opened in the names of people other than the students who had supposedly applied for the funding.

The Justice Department estimates that the alleged fraud extends well beyond the cases already charged. Investigators believe similar schemes involve more than $200 million (Sh25.98 billion) and are the subject of more than 40 open investigations across 26 FBI field offices.

In September and October 2026, investigators identified 830,840 potentially fraudulent Federal Student Aid IDs linked to nearly $130 million (Sh16.89 billion) and recommended that the Department of Education disable the IDs.

"To date, the FBI has identified more than $32 million (Sh4.16 billion) in losses, with millions more suspected, in similar ghost student schemes. This stops now," said FBI Criminal Investigation Division Assistant Director Heith Janke.

He said the FBI, working with the Department of Education and the Department of Justice, would follow the evidence, track the money and pursue those seeking to exploit American taxpayers.

Under Secretary Nicholas Kent of the Department of Education said the department had so far saved more than $2 billion (Sh259.84 billion) in attempted student aid theft.

McDonald said Operation Ghostbusters would continue working with Kenyan law enforcement agencies to recover the money and bring suspects operating outside the US to justice.

"Operation Ghostbusters continues to partner with Kenyan law enforcement counterparts to recover American tax dollars pilfered by overseas actors and bring fraudsters hiding abroad to justice," he said.