Agyeman claimed in advertising and marketing supplies that his enterprise, Arms-Free Automation, had “5-year exclusivity contracts” with hundreds of property homeowners that gave it permission to relist their properties at the next worth.
Getting concerned with Arms-Free Automation, or HFA, required a fee of between $20,000 and $30,000 to successfully personal a bit of Airbnb listings. Agyeman described it as a “minimal to no threat” path to additional earnings 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 become profitable on {the marketplace} utilizing a observe that Airbnb explicitly prohibits. Agyeman was following related techniques that he’d used on Amazon and Shopify, the place he promoted the chance for buyers to passively personal digital storefronts.
The tech firms that personal these marketplaces all say they use a mixture of artificial intelligence and automation together with guide opinions to watch vendor and buyer exercise for fraud and different misbehavior, however they have been ill-equipped to cope with the amount of complaints stemming from varied kinds of scams.
The Federal Commerce Fee and the Division of Justice have cracked down on firms 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 Division, FTC or any legislation enforcement company.
Airbnb instructed CNBC it was unaware of any contact from regulators concerning HFA.
For a clearer image of HFA’s internal workings, CNBC spoke with buyers in a lawsuit filed in opposition to the corporate in February 2023, in addition to six former HFA staff, an Airbnb buyer who unwittingly stayed at an HFA-listed property, and a property proprietor who stated his listings had been uploaded to Airbnb by HFA with out permission. CNBC has granted anonymity to those that requested it as a result of they weren’t approved to talk publicly on HFA’s operations, or feared retribution from the corporate.
Brian Chesky, co-founder and CEO of Airbnb, Inc., speaks throughout an interview with CNBC on the ground of the New York Inventory Change in New York Metropolis, Could 10, 2023.
Brendan McDermid | Reuters
Carr, who lives in New York, wired HFA $1,000 by way of his crypto debit card on the urging of a salesman and borrowed a further $18,490 to pay for HFA’s entry-level package deal. In complete, Carr paid HFA $19,497, based on 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 instructed CNBC that his funding with HFA disappeared, leaving him in debt and dealing a customer support job to make ends meet. He claims he bought scammed and suspects that a lot of his cash went towards subsidizing Agyeman’s life-style.
“I could not consider that I misplaced $20,000 into skinny air,” Carr stated.
Thomas Hunker, an lawyer for Agyeman and HFA, denied that buyer cash had been used for something besides the enterprise.
“We’ve got at all times honored our fiduciary obligations with respect to allocation of firm cash in the perfect curiosity of the corporate,” Hunker stated in a written response to CNBC.
HFA admitted to prospects that it was “repeatedly encountering issues with” Airbnb “because of the fixed modifications they’ve made to their phrases and providers,” based on the lawsuit.
Plaintiffs within the swimsuit in opposition to Agyeman and different defendants are asking for not less than $624,000 in damages from their misplaced investments. In the meantime, the defendants proceed to promote and promote merchandise to potential buyers underneath a brand new firm referred to as Wealthway. They’re deploying a group that goals to generate greater than $3.5 million in month-to-month gross sales, Wessel Botes, a former gross sales worker who left the corporate in November, instructed CNBC.
Hunker stated in an electronic mail to CNBC that HFA identifies properties to checklist from third-party web sites utilized by accommodations and different property homeowners to “improve bookings.” That offers HFA “oblique permission” by way of these third-party websites to relist rooms on Airbnb, he stated, including that the bottom worth of the reserving goes again to the property proprietor.
Nonetheless, Airbnb has banned the observe in its terms of service and community policy since not less than 2021.
“Utilizing a third get together to guide a lodge or third get together lodging and itemizing it on Airbnb at an inflated price will not be allowed,” the coverage says.
Airbnb instructed CNBC that enterprise practices resembling Agyeman’s aren’t permitted. The corporate stated it continues to enhance methods that establish and take away pretend or deceptive listings, including that it had blocked greater than 216,000 suspicious listings as of September.
Hunker stated HFA does not have buyers, however quite has purchasers who pay a “flat payment” for an arbitrage service. But, 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.”
Earlier than connecting CNBC together with his lawyer, Agyeman stated in an interview that he wasn’t concerned within the day-to-day operations at HFA and he denied any monetary improprieties.
Airbnb instructed CNBC it had no enterprise relationship with Agyeman and had taken motion to curtail his operations. The corporate stated a number of accounts linked to Agyeman and HFA had been eliminated.
The chance for property homeowners to become profitable is key to Airbnb’s enterprise mannequin. The corporate says that, since its founding in 2007, hosts have made greater than $180 billion. En path to upending the lodge trade, Airbnb’s market cap has swelled to virtually $95 billion, making it greater than any lodge chain.
Airbnb acknowledged in its annual report that “perpetrators of fraud” use “complicated and always evolving” techniques on the positioning 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 may totally automate the arbitrage course of by trawling the web for properties to relist at a markup. HFA’s staff would care for reserving properties and deal with visitor inquiries and complaints.
Agyeman, 27, lives in Texas, as does Shears, 26, based on public data. Their social media posts present luxurious trip spots subsequent to screenshots of Airbnb bookings purportedly value hundreds of {dollars}. A number of buyers stated in court docket filings that they first discovered about Agyeman and Shears by way of Instagram.
“It is confirmed and it really works and also you get larger returns than the inventory market,” one HFA promotional video said.
Buyers within the lawsuit say in any other case. And a few prospects who used the service to guide journey say they misplaced cash and had been 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 provided that CNBC not use her final title, paid $4,600 upfront for what she thought was a “unbelievable” poolside one-bedroom condominium. CNBC recognized Kathy as an HFA buyer as a result of her title and cellphone quantity had been 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 instructed she’d have to interact immediately with the host to cancel her reserving.
Kathy regarded up the property’s deal with on Google Maps. Fairly 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.
Determined to ensure she had a spot to remain, Kathy booked a room at a resort in Fort Myers, greater than 40 miles from Sanibel Island. In the end, 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.
For Agyeman and Shears, Airbnb was simply one in every of their stomping grounds. That they had an Amazon and Shopify automation enterprise, a trucking enterprise, and a line of vegan gummies. Agyeman additionally helped run a YouTube channel centered partly on swapping ideas for working a profitable enterprise.
The duo broke into the arbitrage enterprise in 2020. In response to the lawsuit, Agyeman and Shears claimed in advertising and marketing materials that that they had greater than 200,000 properties and had “proprietary relationships with Airbnb and Vrbo,” Expedia’s trip rental web site.
Agyeman relied on freelancers who would take knowledge from different journey reserving websites to make use of on their Airbnb and Vrbo listings, based on former staff 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 modifications on the unique itemizing. Agyeman stated on social media that his staff had been “the one ones tapped into Airbnb & Vrbo Arbitrage Automation.”
One spreadsheet listed 68 completely different purchasers as Airbnb buyers. Going not less than way back to July 2022, HFA attracted 120-plus buyers who collectively paid near $3 million for “automated” Airbnb, Shopify, or Amazon companies, based on inside fee monitoring and monetary data 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 either side of {the marketplace}. On one event, he stated, he was contacted by the proprietor of a lodge who discovered one in every of its rooms on Airbnb. One other time, a lady messaged him 30 to 40 occasions when she could not discover her reserving.
“Individuals are going to the accommodations saying I bought an Airbnb, they usually’re like, ‘What are you speaking about?'” Carr stated.
Carr and different HFA buyers instructed CNBC their frustrations had been dismissed or met with authorized threats. However in a letter to buyers cited within the lawsuit, HFA conceded that its Airbnb enterprise had been disappointing.
“As a result of Airbnb fixed modifications we consider this program will take for much longer than anticipated that can assist you our shopper attain your targets,” HFA wrote.
Nonetheless, HFA declined to refund buyers’ funds, as a substitute providing them an Amazon or Shopify storefront, based on 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 corporate requires hosts to show possession. To get round Airbnb’s guidelines, HFA instructed its buyers to checklist their very own properties, a former worker and two buyers instructed CNBC. Hunker denies that HFA gave these directions. As soon as validated as a property proprietor, buyers may then add extra listings that HFA would pull from different web sites.
Unfavourable opinions flowed in from sad would-be vacationers, outraged buyers and a enterprise proprietor who’d found his property had been listed with out consent.
An HFA investor instructed CNBC that one itemizing obtained a remark from a visitor who stated he paid $800 for a motel room that price lower than half that quantity and described it as a “complete rip-off.”
“Host doesn’t personal the property,” the reviewer stated, based on a screenshot of the message seen by CNBC. “It’s a normal motel room, no frills.”
On a scorching September day in Las Vegas in 2022, one other visitor confirmed up at an MGM lodge solely to find there was no reservation by way of Airbnb. Neither the visitor nor Airbnb may get in contact with the listed host for hours. Carr, the HFA investor host on file for the property, offered CNBC with screenshots of the messages.
“I had my household double parked on the Vegas strip for 3 hours losing fuel whereas I used to be working forwards and backwards between the three MGMs in 103 diploma climate being instructed every time after ready in line that there was no reservation in my title,” the visitor wrote.
Finally MGM discovered the room had been booked by way 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 Could 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 price 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 one ever responded to his message, however the itemizing was ultimately taken down.
Airbnb finally eliminated most if not all of HFA’s listings over the course of a number of months in 2022, based on the lawsuit, although staff and buyers instructed CNBC they weren’t certain why.
A number of buyers instructed CNBC that they encountered verification issues as a result of it was unattainable to show they owned their listings. HFA responded by forging payments or different paperwork with the stolen listings’ deal with, based on buyers, the lawsuit, an HFA coaching video, and a former worker.
If the allegations are true, HFA was sidestepping a key security function. 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 instructed CNBC that it was rolling out a extra sturdy verification course of within the U.S. and elsewhere starting as early as 2024.
Hunker denied allegations that HFA forges paperwork, and stated Airbnb does not require the lister to be the property proprietor.
By the tip of final yr, HFA’s buyers realized that their promised features weren’t materializing. Dozens unsuccessfully pressed for refunds of their deposits, based on 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 supply refunds, buyers filed their lawsuit, with 22 plaintiffs saying they obtained fewer than 5 bookings every, together with 16 who stated that they had no bookings in any respect.
Hunker stated HFA may current data displaying its purchasers profited from the corporate’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 non-public fairness enterprise referred to as OKU Capital. Agyeman is its solely member, based on 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 is much like HFA, all the way down to the branding on its web site.
On its web site, Wealthway has a video showing to indicate a gathering between Agyeman and an Airbnb government 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 unimaginable and also you guys have been following our associate pointers,” Levine says within the recording.
In November, Botes, the previous 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, based on screenshots of the messages considered by CNBC. “Neither I, nor Airbnb, have any affiliation with Wealth Methods Trip Leases.”
Airbnb stated it believes the clip is inauthentic. Levine did not reply to CNBC’s LinkedIn message. Hunker did not reply to a query in regards to the video’s authenticity.
