In a major development, two men have been indicted on fraud charges for running a massive scam on vacation rental sites Airbnb and Vrbo, allegedly racking up over $8.5 million. The accused, Shray Goel, 35, of Miami, and Shaunik Raheja, 34, of Denver, are facing charges of conspiracy to commit wire fraud, wire fraud, and aggravated identity theft.

The U.S. Attorney's Office for the Central District of California released a statement, describing the scam as a "double-booking, bait-and-switch scheme" that involved more than 10,000 reservations across 10 states. Goel and Raheja, along with their employees, managed around 100 properties throughout the country by 2019.

According to prosecutors, the defendants used multiple names, including Abbot Pacific LLC, to carry out their fraudulent activities. They would double-book properties through numerous listings of the same property and then cancel or switch lower-paying guests to different, inferior accommodations using bogus last-minute excuses, often claiming plumbing problems.

The scam also involved a secret bidding war for the properties. Multiple listings for the same property at different prices were posted, allowing the highest bidder to rent a particular property. The lower-paying guests would then be tricked into moving to a different property in the area.

Furthermore, prosecutors revealed that the defendants engaged in racial prejudice and discrimination when deciding who to rent to, avoiding renting to guests they perceived to be Black.

Goel was arrested on December 27 in Florida, while Raheja has not been apprehended yet. The defendants are expected to be arraigned in federal court in Los Angeles in the coming weeks.

Martin Estrada, the Attorney for the Central District of California, condemned the defendants' actions, stating that their scheme victimized thousands of consumers and families across the country. He also highlighted the racial bias involved in the alleged discrimination against potential renters.

Michael Freedman, Goel's attorney, issued a statement denying the allegations and expressing his client's intention to defend against them in court. On the other hand, an attorney representing Raheja could not be reached for comment.

Both Airbnb and Vrbo were also victimized and defrauded by the defendants, according to prosecutors. Goel and Raheja used fake host names and other people's identities to list properties. They also employed fake host accounts to conceal their own identities, double-book properties, and post fake positive reviews.

Airbnb responded to the news by emphasizing that their platform is built on trust and that bad actors have no place in their community. They stated that they have implemented measures like identity and listing verification to deter deceptive behavior.

Vrbo, on the other hand, has not yet provided a comment on the matter.

The indictment carries serious charges, with conspiracy and wire fraud each carrying a maximum penalty of 20 years in federal prison. Additionally, Goel is facing two counts of aggravated identity theft, which come with a mandatory consecutive sentence of two years.

This case highlights the need for increased vigilance in the vacation rental industry and the importance of platforms like Airbnb and Vrbo taking steps to prevent fraudulent activities. The investigation is ongoing, and both companies are cooperating with the government in the process.