The Deceptive World of Airbnb Arbitrage: A Scheme Promising ‘Higher Returns Than the Stock Market’

The world of short-term rentals has seen a significant surge in popularity, with platforms like Airbnb enabling individuals to monetize their unused spaces. However, as with any marketplace, there are those who seek to exploit it for their own gain. One such business, Hands-Free Automation (HFA), has been accused of defrauding investors through an arbitrage scheme on Airbnb.

HFA, which has no affiliation with Airbnb, took advantage of the platform’s sprawling marketplace to list hotel rooms from other sites at a higher price. The founders of HFA, Anthony Agyeman and Megan Shears, convinced investors to put in money with the promise of profits from the pricing arbitrage. However, Airbnb explicitly prohibits such practices in its community policy.

Daryn Carr, a New York resident, was one of the many individuals who fell prey to HFA’s deceptive marketing materials. Promising minimal to no risk and guaranteed returns within three to six months, HFA required an investment of between $20,000 and $30,000. The investors were led to believe that they would effectively own a piece of Airbnb listings.

Despite having no formal relationship with Airbnb, HFA found a way to make money on the platform by following similar tactics used on Amazon and Shopify. The tech companies, which own these marketplaces, claim to use a combination of artificial intelligence, automation, and manual reviews to monitor vendor and customer activity for fraud and misbehavior. However, they have been ill-equipped to deal with the volume of complaints stemming from various 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 selling “automated” software that didn’t work. HFA and Agyeman have not been charged by the Justice Department, FTC, or any law enforcement agency.

Airbnb told CNBC that it was unaware of any contact from regulators regarding HFA. To gain a clearer understanding 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.

Carr, who lost his mother to Covid in 2020, wired HFA $1,000 through his crypto debit card and borrowed an additional $18,490 to pay for HFA’s entry-level package. In total, Carr paid HFA $19,497. The lawsuit, which Carr filed along with 11 other investors, 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, who now works a customer service job to make ends meet, claims that his investment with HFA disappeared, leaving him in debt. He suspects that much of his money went toward subsidizing Agyeman’s lifestyle.

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.” 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 aim to generate more than $3.5 million in monthly sales.

Hunker said that HFA identifies properties to list from third-party websites used by hotels and other property owners to increase bookings. This, he argued, gives HFA “indirect permission” to relist rooms on Airbnb. However, Airbnb has banned such practices in its terms of service and community policy since at least 2021.

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

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, and Shears, 26, live in Texas. Their social media postings show luxurious vacation spots next to screenshots of Airbnb bookings worth thousands of dollars. Several investors said they first learned about Agyeman and Shears through Instagram.

One HFA promotional video claimed, “It’s proven and it works and you get higher returns than the stock market.” However, investors in the lawsuit and some customers who used the service to book travel say otherwise. 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.

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. Instead of 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.

The opportunity for property owners to make money is fundamental to Airbnb’s business model. Since its founding in 2007, hosts have made over $180 billion. 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.”

In conclusion, the Airbnb arbitrage business, as represented by Hands-Free Automation, has proven to be a deceptive scheme that promised ‘higher returns than the stock market’ to unsuspecting investors. The founders of HFA, Anthony Agyeman and Megan Shears, have been accused of defrauding investors by taking advantage of Airbnb’s marketplace to list hotel rooms from other sites at a higher price, despite Airbnb’s explicit prohibition of such practices. The consequences of this scheme have left many investors in debt and seeking legal recourse. Airbnb continues to improve its systems to identify and remove fraudulent listings, but the volume of complaints and the complexity of the tactics used by fraudsters make it a constant challenge.