Matthew Cox: FBI Most Wanted Con Man - $55 Million in Bank Fraud | Lex Fridman Podcast #409

Matthew Cox recounts his foray into the world of mortgage broker fraud, a journey that began with small alterations to documents and evolved into elaborate schemes and manipulations.

First fraudulent act: Whitening out client's 30-day late rent payment

Cox admits that any form of lying to the bank is fraud and describes his first fraudulent act. He used white-out to remove a 30-day late payment on a client's rent from a document. Success with this act emboldened him and resulted in checks of $2,500 to $3,500. This experience provided him with the knowledge and confidence to commit further fraud and deeply ingrained him in the business of deception.

Evolution to more sophisticated mortgage fraud schemes

Cox's fraudulent acts quickly became more systematic and sophisticated. He started with altering his client's W-2 from $45,000 to $51,000 and progressed to systematic changes on W-2s, pay stubs, appraisals, and verifications of rent to ensure loans would close. Cox mentions that he built insider knowledge by interacting with underwriters, owners of lending institutions, and account executives from various lenders. Cox owned a mortgage company where he estimates 60 to 70% of operations involved fraud, despite outward appearances as a legitimate business approved by FHA and VA.

He learned the intricacies of the trade through interactions with underwriters and account executives, which allowed him to refine his fraudulent techniques. He also gained insights on fraud detection from calls with lenders, leading him to become more creative with his deception, such as establishing a fake bank complete with its own website and voicemail.

Cox also recounts how he manipulated the industry itself, although he points out that there is a delicate balance as overly strict systems could prevent average people from obtaining loans.

Changing W2s, pay stubs, appraisals to get loans approved

The extent of Cox’s fraudulent activities ranged from altering financial documents to creating entirely fictitious entities to support his fraudulent loan applications. He had mastered the art of altering documents in such a way that client ...

Matthew Cox details the alarming process of how to create synthetic identities for fraudulent activities, explaining the complexities and strategic planning that goes into this form of fraud.

Ordering fake birth certificates and documents

Cox discusses the in-depth process of creating fake birth certificates, including ordering a seal and using sandpaper to wear it down to make it look like an authentic document before embossing it. He ordered vital information such as birth certificates and social security cards for fictional people, suggesting he would order more documentation than necessary to build credibility.

Getting social security numbers issued for fake people

Cox initially used children's Social Security numbers, altered the dates of birth to make them appear as adults, and successfully applied for credit cards. He faced resistance when attempting to get new Social Security numbers for adults but eventually developed a convincing story. He claimed to be the parent of a child born with a midwife and not in a hospital, which explained the absence of a Social Security number. This tactic manipulated the Social Security Administration into issuing new numbers for these fictitious identities.

He mentioned cases like a woman who used her young son's social security number to obtain services and credit after a divorce, effectively creating a synthetic identity without the son's active involvement. Cox even described how one could pick a name to use when obtaining a Social Security number and that he went as far as using the name Scott Cugno in Alabama to get both a driver's license and a Social Security number issued.

Building credit profiles and histories for fake people

Cox explains that a credit profile consists of a name, date of birth, address, and social security number, which is created when personal information is provided to apply for credit. He detailed how he applied for secured credit cards using the new synthetic identities and made payments on those cards. This process established credit profiles for the non-existent persons. Over time, this method led to synthetic identities achieving high credit scores, making them appear f ...

Matthew Cox describes a vast property fraud scheme involving synthetic identities, where he and his co-conspirators would purchase properties cheaply, artificially inflate their value, and then take out large loans against them.

Buying properties cheaply then artificially inflating sales prices

Cox details how he would buy properties for significantly lower prices—such as $50,000 to $70,000—and record them at inflated prices of $200,000 or even $210,000, to artificially raise their market value. He explains that these low-priced properties were often found in areas like Ybor City, with initial high price listings on the MLS that fell due to lack of interest.

Taking out loans against properties in names of fake people

Cox explains that after buying these properties and recording higher values, he would create synthetic identities, such as James Red, Lee Black, and Brandon Green, to take out loans on these properties. He would then sign documents at closings, pretending these fake people were unavailable because they were at work. For example, one of the identities named "Alan Duncan" was used to borrow over a million dollars.

Cox also created a driver's license for these fake identities using actual photographs from arrest records. These forged IDs could be used to open bank accounts and facilitate property closings. He further details a scam where his wife, who was not working, would sell properties to these synthetic identities, with fake W2s and pay stubs provided to obtain loans. This resulted in these properties being refinanced and substantial cash being pulled out of them.

New products entering consumer marketplace

Using artificial identities, Cox would refinance homes, pulling out money from the properties. This included buying a house for $50,000, renovating it, and then getting an appraisal for $100,000. To further enhance the scam, Cox would buy houses and sell them to synthetic identities for $100,000 without having to invest much into the properties..curve, it appeared to be in good condition.

Using comparable fraudulent sales to get inflated appraisals

Cox describes a scenario where he would use the sale of cheap properties at inflated prices to get properties appraised at a higher value. To make this possible, he would pay extra dock stamps, making the sales appear much higher on record.

Moreover, he managed to perform his own appraisals by creating an email address for a real appraiser and providing her license to the softwa ...

Matthew Cox reflects on his journey from being a perpetrator of large-scale property fraud to evading authorities and ultimately coming to terms with the consequences of his actions through cooperation and capture.

Dodging authorities while continuing fraud across U.S.

Cox details his experiences as he attempted to avoid legal troubles. Initially seeking legal advice and paying for a federal defense attorney, he tried to delay immediate confrontation with the FBI. Upon learning that two informants had implicated him, Cox came to understand that he could not stand trial. Meanwhile, his fraudulent activities continued unabated.

An associate initially involved in the scam was arrested and their cooperation with law enforcement included guiding them to a pattern of foreclosures linked with the synthetic identities used in Cox’s operation. The result was the creation of a state-level task force set out to unravel the property frauds across multiple counties.

As some of his collaborators turned themselves in and cooperated with the authorities, receiving reduced sentences, Cox found himself contemplating his own level of cooperation. Interviewed by the Secret Service, who he found professional, Cox acknowledges that he was willing to sacrifice loyalty if it meant reducing his own prison sentence.

While maintaining fraudulent activities, Cox engaged in various strategies to remain off the radar, including using different aliases, leaving for Atlanta with fake IDs, and avoiding attention. Despite transactions involving large amounts of cash and multiple identities, Cox managed to evade detection while buying and flipping houses, and even underwent physical changes to alter his appearance and stay below the radar of law enforcement.

Sacrificing loyalty to avoid prison time

Cox discusses the various forms of cooperation with federal authorities that can lead to a reduction in punishment, including informing on others, testifying in court, and wearing a wire. As suspicion rose among his collaborators and the threat of capture loomed, Cox's loyalty waned.

He faced instances where those around him, like Becky and his former employee Susan Barker, chose not to come to his aid or actively cooperated with the FBI, sharing information that pointed to Cox as the mastermind behind the frauds.

Cox himself ultimately grappled with the concept of cooperation. While initially resistant to the idea, he acknowledged that the reality of facing significant jail time pushed most people, including him, into cooperating with authorities. When finally captured, Cox adhered to h ...