LOS ANGELES
A Glendale man was sentenced Monday to seven years in federal prison for running a series of “bust out” scams that defrauded more than 20 banks out of nearly $5 million, officials stated.
The credit cards were used to buy millions of dollars in liquor and cemetery plots that were later sold for a profit.
U.S. District Judge George H. Wu also ordered Mikayel Hmayakyan, 43, was sentenced by to pay $4,906,534 in restitution.
Hmayakyan plead guilty on June 29 to two counts of bank fraud and one count of aggravated identity theft.
Officials explained that a “bust out” scam is a form of fraud in which a person applies for a credit card, often using a stolen identity, with the intention of “maxing out” the card with no intention of paying off the debt.
Hmayakyan and his co-conspirators fraudulently obtained credit cards – sometimes using their real names, but also fake IDs
After the cards were maxed out members of the scheme “paid down” the cards by submitting payments from accounts with insufficient funds or through other fake accounts to restore the credit line, officials stated.
This allowed them to make additional fraudulent purchases, according to officials.
For example, from 2014 through 2017, Hmayakyan – with no intention to pay any credit card bills – charged and directed others to charge over $3 million to buy things such as liquor, Rolex watches, and Forest Lawn cemetery plots.
The liquor was purchased on behalf of the now-closed Liquor Spot in Glendale, where co-defendant Vahan Aloyan, 45, of Glendale, was a manager.
During the execution of a search warrant in 2016, law enforcement seized more than 37,000 bottles of alcoholic beverages, worth approximately $300,000, from the Liquor Spot, officials stated.
They also seized nearly $13,000 in cash from the store, as well as nearly $13,000 in cash and 37 watches and other jewelry items from Aloyan’s residence, according to court documents.
In another set of scams, from 2010 through 2011 and again from 2015 through 2016, Hmayakyan applied for a number of loans in the name of real and fictitious people.
He used the loan proceeds to finance the purchase of vehicles, but would not make the payments.
Hmayakyan caused losses of more than $400,000 to the banks who gave those loans.
The total actual loss to which the financial institutions were exposed was $4.9 million.
Gayane Hakobyan, 70, of Hollywood Hills, admitted in June that she participated in the “bust-out” scheme by allowing others to open credit card accounts in her name.
On October 8, Judge Wu sentenced her to two years’ probation and ordered her to pay $223,235 in restitution.
Mikayel Hovhannisyan, 38, of North Hollywood, plead guilty in June 2019 to one count of bank fraud, served a nine-month federal prison sentence, and was ordered to pay $412,413 in restitution.
Aloyan, the case’s sole remaining defendant, is scheduled to go on trial in this matter on March 15.