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November 16, 2020Los Angeles, CAUnited StatesFinancial Crimes

ICE HSI probe results in 7-year prison sentence for Los Angeles-area man for his role in credit card ‘bust out’ scams used to buy liquor and cemetery plots

LOS ANGELES – A Glendale man was sentenced today to 84 months in federal prison for running a series of “bust out” scams that defrauded more than 20 banks out of nearly $5 million by, among other things, using fraudulently obtained credit cards to buy millions of dollars in liquor and cemetery plots that were later sold for a profit.

Mikayel Hmayakyan, 43, was sentenced by U.S. District Judge George H. Wu, who also ordered him to pay $4,906,534 in restitution.

As the result of an investigation by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Los Angeles, U.S. Secret Service and Glendale Police Department, Hmayakyan pleaded guilty on June 29 to two counts of bank fraud and one count of aggravated identity theft.

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 with synthetic identities created with a combination of real and fictitious information. After the cards were run up to the credit limit, 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, which allowed them to make additional fraudulent purchases.

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, HSI special agents and law enforcement partners seized more than 37,000 bottles of alcoholic beverages, worth approximately $300,000, from the Liquor Spot. 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 without making 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 $4,906,534.

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, pleaded 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, 2021.

The case is being prosecuted by the U.S. Attorney for the Central District of California’s Major Frauds and Asset Forfeiture Sections.

Updated: 11/24/2020