Investors in Airbnb arbitrage business allege they were defrauded

Agyeman claimed in marketing materials that his business, Hands-Free Automation, had “5-year exclusivity contracts” with thousands of property owners that gave it permission to relist their properties at a higher price.

Getting involved with Hands-Free Automation, or HFA, required a payment of between $20,000 and $30,000 to effectively own a piece of Airbnb listings. Agyeman described it as a “minimal to no risk” path to extra income with a guaranteed return in three to six months of investment, “then pure profit after.”   

HFA has no affiliation with Airbnb but found a way to make money on the marketplace using a practice that Airbnb explicitly prohibits. Agyeman was following similar tactics that he’d used on Amazon and Shopify, where he promoted the opportunity for investors to passively own virtual storefronts. 

The tech companies that own these marketplaces all say they use a combination of artificial intelligence and automation along with manual reviews to monitor vendor and customer activity for fraud and other misbehavior, but they’ve been ill-equipped to deal with the volume of complaints stemming from various sorts of scams.

The Federal Trade Commission and the Department of Justice have cracked down on companies similar to HFA, accusing them of advertising their products with false promises of profit and success and allegedly selling “automated” software that didn’t work. HFA and Agyeman haven’t been charged by the Justice Department, FTC or any law enforcement agency. 

Airbnb told CNBC it was unaware of any contact from regulators regarding HFA.

For a clearer picture of HFA’s inner workings, CNBC spoke with investors in a lawsuit filed against the company in February 2023, as well as six former HFA employees, an Airbnb customer who unwittingly stayed at an HFA-listed property, and a property owner who said his listings were uploaded to Airbnb by HFA without permission. CNBC has granted anonymity to those who requested it because they weren’t authorized to speak publicly on HFA’s operations, or feared retribution from the company.

Carr, who lives in New York, wired HFA $1,000 through his crypto debit card at the urging of a salesperson and borrowed an additional $18,490 to pay for HFA’s entry-level package. In total, Carr paid HFA $19,497, according to the lawsuit, which Carr filed along with 11 other investors. The plaintiffs alleged that HFA falsely claimed it had relationships with the properties, and that HFA’s services violated Airbnb’s terms of service. The case is still proceeding. 

Carr told CNBC that his investment with HFA disappeared, leaving him in debt and working a customer service job to make ends meet. He claims he got scammed and suspects that much of his money went toward subsidizing Agyeman’s lifestyle.

“I couldn’t believe that I lost $20,000 into thin air,” Carr said. 

Thomas Hunker, an attorney for Agyeman and HFA, denied that customer money had been used for anything except the business. 

“We have always honored our fiduciary obligations with respect to allocation of company money in the best interest of the company,” Hunker said in a written response to CNBC.

HFA admitted to customers that it was “continuously encountering problems with” Airbnb “due to the constant changes they have made to their terms and services,” according to the lawsuit. 

Plaintiffs in the suit against Agyeman and other defendants are asking for at least $624,000 in damages from their lost investments. Meanwhile, the defendants continue to advertise and sell products to prospective investors under a new company called Wealthway. They’re deploying a team that aims to generate more than $3.5 million in monthly sales, Wessel Botes, a former sales employee who left the company in November, told CNBC. 

Hunker said in an email to CNBC that HFA identifies properties to list from third-party websites used by hotels and other property owners to “increase bookings.” That gives HFA “indirect permission” through those third-party sites to relist rooms on Airbnb, he said, adding that the base price of the booking goes back to the property owner.

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

“Using a 3rd party to book a hotel or 3rd party accommodation and listing it on Airbnb at an inflated rate is not allowed,” the policy says.  

Airbnb told CNBC that business practices such as Agyeman’s aren’t permitted. The company said it continues to improve systems that identify and remove fake or misleading listings, adding that it had blocked more than 216,000 suspicious listings as of September.

Hunker said HFA doesn’t have investors, but rather has clients who pay a “flat fee” for an arbitrage service. Yet, HFA says on its LinkedIn page that it helps “Airbnb investors add 300+ properties to their account without having to purchase the properties.”

Before connecting CNBC with his attorney, Agyeman said in an interview that he wasn’t involved in the day-to-day operations at HFA and he denied any financial improprieties. 

Airbnb told CNBC it had no business relationship with Agyeman and had taken action to curtail his operations. The company said multiple accounts linked to Agyeman and HFA had been removed.

The opportunity for property owners to make money is fundamental to Airbnb’s business model. The company says that, since its founding in 2007, hosts have made more than $180 billion. En route to upending the hotel industry, Airbnb’s market cap has swelled to almost $95 billion, making it bigger than any hotel chain.

Airbnb acknowledged in its annual report that “perpetrators of fraud” use “complex and constantly evolving” tactics on the site and that “fraudsters have created fake guest accounts, fake host accounts, or both, to perpetrate financial fraud.”

Agyeman, who started HFA with co-founder Megan Shears, claims to have created proprietary software that would fully automate the arbitrage process by trawling the internet for properties to relist at a markup. HFA’s employees would take care of booking properties and handle guest inquiries and complaints.

Agyeman, 27, lives in Texas, as does Shears, 26, according to public records. Their social media posts show luxurious vacation spots next to screenshots of Airbnb bookings purportedly worth thousands of dollars. Several investors said in court filings that they first learned about Agyeman and Shears through Instagram.

“It’s proven and it works and you get higher returns than the stock market,” one HFA promotional video said. 

Investors in the lawsuit say otherwise. And some customers who used the service to book travel say they lost money and were left scrambling for a place to stay.  

In February 2022, a customer named Kathy booked a beachside Airbnb on Florida’s Sanibel Island for a five-night spring break vacation with her family. Kathy, who spoke on condition that CNBC not use her last name, paid $4,600 upfront for what she thought was a “fantastic” poolside one-bedroom apartment. CNBC identified Kathy as an HFA customer because her name and phone number were posted on HFA’s Instagram account. 

Days went by without word from her host. Kathy, who lives in Texas, repeatedly reached out to Airbnb, but was told she’d have to engage directly with the host to cancel her booking.

Kathy looked up the property’s address on Google Maps. Rather than a tropical apartment building, she saw what appeared to be a vacant lot. “Please refund my money,” she recalled telling the host. 

Desperate to make sure she had a place to stay, Kathy booked a room at a resort in Fort Myers, more than 40 miles from Sanibel Island. Ultimately, after days of back-and-forth messages, Airbnb refunded about half her money.

It ended up being “a super expensive vacation,” Kathy said. “I will never use it again,” she said of Airbnb.

For Agyeman and Shears, Airbnb was just one of their stomping grounds. They had an Amazon and Shopify automation business, a trucking business, and a line of vegan gummies. Agyeman also helped run a YouTube channel focused in part on swapping tips for running a successful business. 

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

Agyeman relied on freelancers who would take data from other travel booking sites to use on their Airbnb and Vrbo listings, according to former employees and internal documents. An internal training video viewed by CNBC instructed copywriters on how to recycle the original listings’ details 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 training document said.

HFA said its software algorithmically adjusted the price of a property in response to changes on the original listing. Agyeman said on social media that his employees were “the only ones tapped into Airbnb & Vrbo Arbitrage Automation.” 

One spreadsheet listed 68 different clients as Airbnb investors. Going at least as far back as July 2022, HFA attracted 120-plus investors who collectively paid close to $3 million for “automated” Airbnb, Shopify, or Amazon businesses, according to internal payment tracking and financial records reviewed by CNBC.

Carr, who was listed as a property host, said that when it came to his experience with HFA, there was chaos on both sides of the marketplace. On one occasion, he said, he was contacted by the owner of a hotel who found one of its rooms on Airbnb. Another time, a woman messaged him 30 to 40 times when she couldn’t find her booking.

“People are going to the hotels saying I got an Airbnb, and they’re like, ‘What are you talking about?'” Carr said.

Carr and other HFA investors told CNBC their frustrations were dismissed or met with legal threats. But in a letter to investors cited in the lawsuit, HFA conceded that its Airbnb business had been disappointing. 

“Due to Airbnb constant changes we believe this program will take much longer than anticipated to help you our client reach your goals,” HFA wrote.

Still, HFA declined to refund investors’ funds, instead offering them an Amazon or Shopify storefront, according to the letter and the lawsuit. Hunker said this was contemplated by the parties’ agreements.

Getting properties listed on Airbnb involved some finagling, because the company requires hosts to prove ownership. To get around Airbnb’s rules, HFA instructed its investors to list their own homes, a former employee and two investors told CNBC. Hunker denies that HFA gave those instructions. Once validated as a property owner, investors could then add more listings that HFA would pull from other websites.

Negative reviews flowed in from unhappy would-be vacationers, outraged investors and a business owner who’d discovered his property had been listed without consent.

An HFA investor told CNBC that one listing received a comment from a guest who said he paid $800 for a motel room that cost less than half that amount and described it as a “total scam.”

“Host does not own the property,” the reviewer said, according to a screenshot of the message seen by CNBC. “It is a standard motel room, no frills.”

On a hot September day in Las Vegas in 2022, another guest showed up at an MGM hotel only to discover there was no reservation through Airbnb. Neither the guest nor Airbnb could get in touch with the listed host for hours. Carr, the HFA investor host on record for the property, provided CNBC with screenshots of the messages.

“I had my family double parked on the Vegas strip for three hours wasting gas while I was running back and forth between the three MGMs in 103 degree weather being told each time after waiting in line that there was no reservation in my name,” the guest wrote.

Eventually MGM found the room had been booked through Expedia, which is where HFA turned after receiving the reservation request on Airbnb.

An Expedia spokesperson declined to comment.

Collin Ballard was shocked in May 2022, when he saw photos from his Dallas hostel advertised on Airbnb. Most alarming was the price: $1,760 a night vs. his starting nightly rate of $40.

Ballard wrote to the host, telling him he was the owner and asking him to remove the listing.

“I just figured it was someone scamming,” Ballard said in an interview, adding that he knew nothing about Airbnb arbitrage. 

Ballard said nobody ever responded to his message, but the listing was eventually taken down.

Airbnb ultimately removed most if not all of HFA’s listings over the course of several months in 2022, according to the lawsuit, though employees and investors told CNBC they weren’t sure why.

Several investors told CNBC that they encountered verification problems because it was impossible to prove they owned their listings. HFA responded by forging bills or other documents with the stolen listings’ address, according to investors, the lawsuit, an HFA training video, and a former employee.

If the allegations are true, HFA was sidestepping a key safety feature. False information can make it difficult for Airbnb to respond in an emergency or a situation that calls for the involvement of its safety team.

Airbnb told CNBC that it was rolling out a more robust verification process in the U.S. and elsewhere beginning as early as 2024.

Hunker denied allegations that HFA forges documents, and said Airbnb doesn’t require the lister to be the property owner.

By the end of last year, HFA’s investors realized that their promised gains were not materializing. Dozens unsuccessfully pressed for refunds of their deposits, according to a former employee, an internal HFA document, and the investor lawsuit.

A month after HFA’s then-counsel wrote to two dozen investors in January 2023 declining to provide refunds, investors filed their lawsuit, with 22 plaintiffs saying they received fewer than five bookings each, including 16 who said they had no bookings at all. 

Hunker said HFA could present records showing its clients profited from the company’s services on the condition that CNBC sign a nondisclosure agreement. CNBC declined.

Agyeman continues promoting his businesses on social media. In his Instagram bio, he includes a new private equity venture called OKU Capital. Agyeman is its only member, according to Florida state filings and the firm’s LinkedIn profile.

Agyeman’s Wealthway advertises “fully managed,” “automated” vacation rental businesses with “minimal to no risk.” It’s similar to HFA, down to the branding on its website.

On its website, Wealthway has a video appearing to show a meeting between Agyeman and an Airbnb executive named David Levine, whose LinkedIn profile says he’s Airbnb’s head of API and enterprise partnerships for North America.

“What you guys have been doing at Wealthway is incredible and you guys have been following our partner guidelines,” Levine says in the recording. 

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

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

Airbnb said it believes the clip is inauthentic. Levine didn’t respond to CNBC’s LinkedIn message. Hunker didn’t respond to a question about the video’s authenticity.

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