Investors in Airbnb arbitrage business allege they were defrauded in scheme promising 'increased returns than the stock market'

Investors in Airbnb arbitrage business allege they were defrauded in scheme promising 'increased returns than the stock market'


Illustration by Elham Ataeiazar

Daryn Carr isn’t any stranger to aspect hustles. After his mother died from Covid in 2020, he used funds from her pension to repay some payments and purchase a automotive. With the remaining cash, he invested in crypto and began an ATM business. 

One day in 2022, whereas scrolling by means of Instagram, he stumbled on one other alternative. Carr discovered a man named Anthony Agyeman, who was selling a kind of arbitrage on Airbnb that concerned taking listings from resort reserving and short-term rental websites and relisting them on Airbnb at the next value, retaining the revenue. 

Agyeman claimed in advertising and marketing supplies that his business, Hands-Free Automation, had “5-year exclusivity contracts” with hundreds of property house owners that gave it permission to relist their properties at the next value.

Getting concerned with Hands-Free Automation, or HFA, required a fee of between $20,000 and $30,000 to successfully personal a chunk of Airbnb listings. Agyeman described it as a “minimal to no threat” path to further revenue with a assured return in three to 6 months of funding, “then pure revenue after.”   

HFA has no affiliation with Airbnb however discovered a technique to generate income on the market utilizing a observe that Airbnb explicitly prohibits. Agyeman was following comparable ways that he’d used on Amazon and Shopify, the place he promoted the alternative for buyers to passively personal digital storefronts. 

The tech corporations that personal these marketplaces all say they use a mix of artificial intelligence and automation together with guide opinions to observe vendor and buyer exercise for fraud and different misbehavior, however they’ve been ill-equipped to cope with the quantity of complaints stemming from numerous kinds of scams.

The Federal Trade Commission and the Department of Justice have cracked down on corporations much like HFA, accusing them of promoting their merchandise with false guarantees of revenue and success and allegedly selling “automated” software program that did not work. HFA and Agyeman have not been charged by the Justice Department, FTC or any legislation enforcement company. 

Airbnb advised CNBC it was unaware of any contact from regulators relating to HFA.

For a clearer image of HFA’s internal workings, CNBC spoke with buyers in a lawsuit filed in opposition to the firm in February 2023, in addition to six former HFA workers, an Airbnb buyer who unwittingly stayed at an HFA-listed property, and a property proprietor who stated his listings were uploaded to Airbnb by HFA with out permission. CNBC has granted anonymity to those that requested it as a result of they weren’t licensed to talk publicly on HFA’s operations, or feared retribution from the firm.

Brian Chesky, co-founder and CEO of Airbnb, Inc., speaks throughout an interview with CNBC on the flooring of the New York Stock Exchange in New York City, May 10, 2023.

Brendan McDermid | Reuters

Carr, who lives in New York, wired HFA $1,000 by means of his crypto debit card at the urging of a salesman and borrowed an extra $18,490 to pay for HFA’s entry-level bundle. In whole, Carr paid HFA $19,497, in response to the lawsuit, which Carr filed together with 11 different buyers. The plaintiffs alleged that HFA falsely claimed it had relationships with the properties, and that HFA’s providers violated Airbnb’s phrases of service. The case remains to be continuing. 

Carr advised CNBC that his funding with HFA disappeared, leaving him in debt and dealing a customer support job to make ends meet. He claims he acquired scammed and suspects that a lot of his cash went towards subsidizing Agyeman’s way of life.

“I could not imagine that I misplaced $20,000 into skinny air,” Carr stated. 

Thomas Hunker, an legal professional for Agyeman and HFA, denied that buyer cash had been used for something besides the business. 

“We have at all times honored our fiduciary obligations with respect to allocation of firm cash in the greatest curiosity of the firm,” Hunker stated in a written response to CNBC.

‘It’s confirmed and it really works’

HFA admitted to clients that it was “repeatedly encountering issues with” Airbnb “attributable to the fixed adjustments they have made to their phrases and providers,” in response to the lawsuit. 

Plaintiffs in the go well with in opposition to Agyeman and different defendants are asking for at the very least $624,000 in damages from their misplaced investments. Meanwhile, the defendants proceed to promote and promote merchandise to potential buyers below a brand new firm known as Wealthway. They’re deploying a workforce that goals to generate extra than $3.5 million in month-to-month gross sales, Wessel Botes, a former gross sales worker who left the firm in November, advised CNBC. 

Hunker stated in an electronic mail to CNBC that HFA identifies properties to record from third-party web sites utilized by motels and different property house owners to “enhance bookings.” That provides HFA “oblique permission” by means of these third-party websites to relist rooms on Airbnb, he stated, including that the base value of the reserving goes again to the property proprietor.

However, Airbnb has banned the observe in its terms of service and community policy since at the very least 2021. 

“Using a third celebration to e book a resort or third celebration lodging and itemizing it on Airbnb at an inflated charge will not be allowed,” the coverage says.  

Airbnb advised CNBC that business practices akin to Agyeman’s aren’t permitted. The firm stated it continues to enhance methods that determine and take away pretend or deceptive listings, including that it had blocked extra than 216,000 suspicious listings as of September.

Hunker stated HFA would not have buyers, however somewhat has shoppers who pay a “flat payment” for an arbitrage service. Yet, HFA says on its LinkedIn web page that it helps “Airbnb buyers add 300+ properties to their account with out having to buy the properties.”

Before connecting CNBC together with his legal professional, Agyeman stated in an interview that he wasn’t concerned in the day-to-day operations at HFA and he denied any monetary improprieties. 

Airbnb advised CNBC it had no business relationship with Agyeman and had taken motion to curtail his operations. The firm stated a number of accounts linked to Agyeman and HFA had been eliminated.

The alternative for property house owners to generate income is key to Airbnb’s business mannequin. The firm says that, since its founding in 2007, hosts have made extra than $180 billion. En path to upending the resort business, Airbnb’s market cap has swelled to nearly $95 billion, making it larger than any resort chain.

Airbnb acknowledged in its annual report that “perpetrators of fraud” use “advanced and continually evolving” ways on the website and that “fraudsters have created pretend visitor accounts, pretend host accounts, or each, to perpetrate monetary fraud.”

Agyeman, who began HFA with co-founder Megan Shears, claims to have created proprietary software program that might totally automate the arbitrage course of by trawling the web for properties to relist at a markup. HFA’s workers would care for reserving properties and deal with visitor inquiries and complaints.

Agyeman, 27, lives in Texas, as does Shears, 26, in response to public information. Their social media posts present luxurious trip spots subsequent to screenshots of Airbnb bookings purportedly value hundreds of {dollars}. Several buyers stated in courtroom filings that they first discovered about Agyeman and Shears by means of Instagram.

“It’s confirmed and it really works and also you get increased returns than the stock market,” one HFA promotional video said

Investors in the lawsuit say in any other case. And some clients who used the service to e book journey say they misplaced cash and were left scrambling for a spot to remain.  

In February 2022, a buyer named Kathy booked a beachside Airbnb on Florida’s Sanibel Island for a five-night spring break trip along with her household. Kathy, who spoke given that CNBC not use her final title, paid $4,600 upfront for what she thought was a “incredible” poolside one-bedroom condominium. CNBC recognized Kathy as an HFA buyer as a result of her title and cellphone quantity were posted on HFA’s Instagram account. 

Days glided by with out phrase from her host. Kathy, who lives in Texas, repeatedly reached out to Airbnb, however was advised she’d have to have interaction instantly with the host to cancel her reserving.

Kathy regarded up the property’s deal with on Google Maps. Rather than a tropical condominium constructing, she noticed what gave the impression to be a vacant lot. “Please refund my cash,” she recalled telling the host. 

Desperate to ensure she had a spot to remain, Kathy booked a room at a resort in Fort Myers, extra than 40 miles from Sanibel Island. Ultimately, after days of back-and-forth messages, Airbnb refunded about half her cash.

It ended up being “a brilliant costly trip,” Kathy stated. “I’ll by no means use it once more,” she stated of Airbnb.

‘Proprietary relationships’

For Agyeman and Shears, Airbnb was simply certainly one of their stomping grounds. They had an Amazon and Shopify automation business, a trucking business, and a line of vegan gummies. Agyeman additionally helped run a YouTube channel centered in half on swapping suggestions for operating a profitable business. 

The duo broke into the arbitrage business in 2020. According to the lawsuit, Agyeman and Shears claimed in advertising and marketing materials that they had extra than 200,000 properties and had “proprietary relationships with Airbnb and Vrbo,” Expedia’s trip rental website.

Agyeman relied on freelancers who would take information from different journey reserving websites to make use of on their Airbnb and Vrbo listings, in response to former workers and inside paperwork. An inside coaching video considered by CNBC instructed copywriters on recycle the unique listings’ particulars for Airbnb or Vrbo.

“PLEASE ANYWHERE IN THE LISTING DO NOT MENTION THAT THIS IS A HOTEL OR THE HOTEL NAMES OF THE HOTEL OR RESORTS,” a coaching doc stated.

HFA stated its software program algorithmically adjusted the value of a property in response to adjustments on the unique itemizing. Agyeman stated on social media that his workers were “the solely ones tapped into Airbnb & Vrbo Arbitrage Automation.” 

One spreadsheet listed 68 completely different shoppers as Airbnb buyers. Going at the very least way back to July 2022, HFA attracted 120-plus buyers who collectively paid near $3 million for “automated” Airbnb, Shopify, or Amazon companies, in response to inside fee monitoring and monetary information reviewed by CNBC.

Carr, who was listed as a property host, stated that when it got here to his expertise with HFA, there was chaos on each side of the market. On one event, he stated, he was contacted by the proprietor of a resort who discovered certainly one of its rooms on Airbnb. Another time, a lady messaged him 30 to 40 instances when she could not discover her reserving.

“People are going to the motels saying I acquired an Airbnb, and they’re like, ‘What are you speaking about?'” Carr stated.

Carr and different HFA buyers advised CNBC their frustrations were dismissed or met with authorized threats. But in a letter to buyers cited in the lawsuit, HFA conceded that its Airbnb business had been disappointing. 

“Due to Airbnb fixed adjustments we imagine this program will take for much longer than anticipated that will help you our consumer attain your objectives,” HFA wrote.

Still, HFA declined to refund buyers’ funds, as a substitute providing them an Amazon or Shopify storefront, in response to the letter and the lawsuit. Hunker stated this was contemplated by the events’ agreements.

Getting properties listed on Airbnb concerned some finagling, as a result of the firm requires hosts to show possession. To get round Airbnb’s guidelines, HFA instructed its buyers to record their very own properties, a former worker and two buyers advised CNBC. Hunker denies that HFA gave these directions. Once validated as a property proprietor, buyers might then add extra listings that HFA would pull from different web sites.

Negative opinions flowed in from sad would-be vacationers, outraged buyers and a business proprietor who’d found his property had been listed with out consent.

An HFA investor advised CNBC that one itemizing acquired a remark from a visitor who stated he paid $800 for a motel room that value much less than half that quantity and described it as a “whole rip-off.”

“Host doesn’t personal the property,” the reviewer stated, in response to a screenshot of the message seen by CNBC. “It is a normal motel room, no frills.”

On a scorching September day in Las Vegas in 2022, one other visitor confirmed up at an MGM resort solely to find there was no reservation by means of Airbnb. Neither the visitor nor Airbnb might get in contact with the listed host for hours. Carr, the HFA investor host on document for the property, offered CNBC with screenshots of the messages.

“I had my household double parked on the Vegas strip for 3 hours losing gasoline whereas I used to be operating backwards and forwards between the three MGMs in 103 diploma climate being advised every time after ready in line that there was no reservation in my title,” the visitor wrote.

Eventually MGM discovered the room had been booked by means of Expedia, which is the place HFA turned after receiving the reservation request on Airbnb.

An Expedia spokesperson declined to remark.

Collin Ballard was shocked in May 2022, when he noticed images from his Dallas hostel marketed on Airbnb. Most alarming was the value: $1,760 an evening vs. his beginning nightly charge of $40.

Collin Ballard discovered a room from his Dallas hostel listed on Airbnb with out his permission.

Collin Ballard

Ballard wrote to the host, telling him he was the proprietor and asking him to take away the itemizing.

“I simply figured it was somebody scamming,” Ballard stated in an interview, including that he knew nothing about Airbnb arbitrage. 

Ballard stated no person ever responded to his message, however the itemizing was finally taken down.

Gains by no means materialized

Airbnb finally eliminated most if not all of HFA’s listings over the course of a number of months in 2022, in response to the lawsuit, although workers and buyers advised CNBC they weren’t positive why.

Several buyers advised CNBC that they encountered verification issues as a result of it was inconceivable to show they owned their listings. HFA responded by forging payments or different paperwork with the stolen listings’ deal with, in response to buyers, the lawsuit, an HFA coaching video, and a former worker.

If the allegations are true, HFA was sidestepping a key security characteristic. False data could make it tough for Airbnb to reply in an emergency or a scenario that requires the involvement of its safety team.

Airbnb advised CNBC that it was rolling out a extra sturdy verification course of in the U.S. and elsewhere starting as early as 2024.

Hunker denied allegations that HFA forges paperwork, and stated Airbnb would not require the lister to be the property proprietor.

By the finish of final yr, HFA’s buyers realized that their promised positive factors were not materializing. Dozens unsuccessfully pressed for refunds of their deposits, in response to a former worker, an inside HFA doc, and the investor lawsuit.

A month after HFA’s then-counsel wrote to 2 dozen buyers in January 2023 declining to offer refunds, buyers filed their lawsuit, with 22 plaintiffs saying they acquired fewer than 5 bookings every, together with 16 who stated they had no bookings in any respect. 

Hunker stated HFA might current information exhibiting its shoppers profited from the firm’s providers on the situation that CNBC signal a nondisclosure settlement. CNBC declined.

Agyeman continues selling his companies on social media. In his Instagram bio, he features a new personal fairness enterprise known as OKU Capital. Agyeman is its solely member, in response to Florida state filings and the agency’s LinkedIn profile.

Agyeman’s Wealthway advertises “totally managed,” “automated” trip rental companies with “minimal to no threat.” It’s much like HFA, all the way down to the branding on its web site.

On its web site, Wealthway has a video showing to point out a gathering between Agyeman and an Airbnb govt named David Levine, whose LinkedIn profile says he is Airbnb’s head of API and enterprise partnerships for North America.

“What you guys have been doing at Wealthway is unbelievable and also you guys have been following our companion tips,” Levine says in the recording. 

In November, Botes, the former HFA salesman, grew to become suspicious of the clip and despatched it to Levine in a LinkedIn message.

“That video seems to have been taken out of context and altered,” Levine replied, in response to screenshots of the messages considered by CNBC. “Neither I, nor Airbnb, have any affiliation with Wealth Ways Vacation Rentals.”

Airbnb stated it believes the clip is inauthentic. Levine did not reply to CNBC’s LinkedIn message. Hunker did not reply to a query about the video’s authenticity.

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