Jyoteshna Karan, 52, and Praveen Singh, 45, both from Modesto, have been sentenced in relation to a multi-million dollar mortgage fraud scheme. Acting United States Attorney Michele Beckwith disclosed that Karan would serve three years and four months in prison, while Singh received a two-year sentence.
The fraudulent activity spanned from 2006 to 2015, during which Karan and Singh orchestrated straw purchases and short sales involving approximately 15 homes located between Modesto and Sacramento. Straw purchases involve someone buying a home on behalf of another to circumvent specific restrictions, a practice generally deemed illegal in real estate due to the risks it poses to lenders. In short sales, a homeowner sells their home for less than the owed mortgage amount with lender approval to avoid foreclosure. Such transactions typically should be arm’s length to safeguard against undervaluation, overpayment, and bias.
The duo allowed the acquired homes to enter foreclosure and negotiated short sales with lenders, subsequently flipping these properties at market rates to generate significant profits. Their actions led to lender losses exceeding $3,000,000.
Both Karan and Singh, seasoned real estate professionals, employed unwitting participants, forged documents, and created shell companies to execute their fraudulent operations. Singh’s mother was one of the straw purchasers used, with documents falsified to show the participants worked for their shell entities with substantial salaries. Additional fabrications suggested these transactions were at arm's length, compelling lenders to proceed with the deals.
The investigation was conducted by the FBI, FDIC OIG, and the Stanislaus County District Attorney’s Office. Assistant United States Attorney Joseph Barton prosecuted the case.