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

Matthew Cox 0:00 She found like, $40,000 in cash in my freezer one night. So she's like, "What is going on?" You know? And I, so we have this conversation and I tell her, "Look, people are looking for me." "Who?" "Law enforcement." "Which ones?" "All of them." You know, and she's like, "That doesn't even, what, for what?" I go, "Mostly bank fraud." And she's like, "Well how are they not finding you? I mean everybody, you know, people know you, like, you know, your general contractor," which I met four months before, this guy six months before, this one two months before." You know? She's like, "So-and-so, so-and-so, so..." And I'm like, "Right, right, well," I said, "Well..." She's like, "I mean, they've got your name, they've got your..." I go, "Well, that's identity theft." And she was like, "W- what do you mean?" I said, "Well my name's not, you know, my name's not, it's not Joseph Carter." "And wha- what is your name? What is your name?" I go, "Look, you know, it's, it's, you don't need, don't even worry about it."

Lex Fridman 1:02 The following is a conversation with Matthew Cox, a con man recently released from federal prison where he served 13 years for bank fraud, mortgage fraud, identity theft, passport fraud and other charges. He has admitted guilt to all of it. He has written true crime stories of many of his fellow prisoners and now he continues this work by interviewing criminals about their crimes on his YouTube channel that I recommend called Inside True Crime. Exploring the mind of a criminal is exploring human nature at the extremes, often in its most raw and illuminating form, and that is something I definitely want to do with this podcast, to understand the human mind and everything it is capable of. This is the Lex Fridman Podcast. To support it, please check out our sponsors in the description, and now, dear friends, here's Matthew Cox.

Lex Fridman 1:59 What was the first crime you committed?

Matthew Cox 2:03 The first mortgage I ever did.

Lex Fridman 2:04 A mortgage is me borrowing money from a bank to buy a house.

Matthew Cox 2:08 Yeah.

Lex Fridman 2:09 How can you find a way to commit crime in this? How can you do fraud in this space?

Matthew Cox 2:16 It's, it's very difficult for the average guy to commit fraud.

Lex Fridman 2:20 Mm-hmm.

Matthew Cox 2:20 Because there's so many safeguards set up. Um, you know, if you were to go in and say, "Um, I make $300,000 a year," okay well we want your W-2s, we want your pay stubs, we're gonna call your employer, we're gonna check to make sure your employer, how long they've been incorporated, we're gonna check to make sure they're registered, we're gonna... It's like, ugh, your whole plan fell apart. You know? Because the average guy can't do that. He can't even come up with a, with the pay stub and W-2. So the average person, you know, or I'm gonna put down this much money, but you're gonna borrow that money from the seller, you know? Okay, well then they start asking for bank statements, where did the money come from, how long has it been in your bank? Like you can't even have it put in your bank for a day, get a letter, you know, it's gotta have been there for 90 days or 60 days depending on the bank. And, and so there's all these ways, for the average person it's very difficult to commit fraud. The average guy that works at Walmart and makes $60,000 a year and he's been there for five years and he's saved his deposit, like, it's very, that's really the guy that those transactions are set up for. To borrow a mortgage from Bank of America, that's the guy they're looking for.

Lex Fridman 3:24 So to commit fraud in this space you had to misrepresent some aspect of your identity, of how much you're worth, how much money you have, this kind of stuff?

Matthew Cox 3:33 Right. You have to be able to, to lie to the bank. A- anytime you lie to the bank you've committed fraud. And it's funny, when I was, you know, doing it I would say, "Ah, it's, it's in the gray area." There's no gray area, you're either lying in some capacity or you're not. So it, for instance, with the very first loan I did, I, I whited out, um, my borrower had been 30 days late on her, uh, on her rent. So they're really looking at the last two years. So when y- when you go into the bank and they, most of what they're asking you is a, is a two year window, they're saying, "How long have you been on their job?" They care about two years. And, "How long have you been at your, um, at your residency?" They're looking for two years. Now you could be at three places in two years, that's fine, as long as you consistent- consistently paid for two years. Well she had been in an apartment complex but she'd been 30 days late. Now she caught it up, but she was late. Bank, you know, the bank doesn't want to lend you money if, if you've been 30 days late. So I was a broker and I whited out the 30 day late. I just got rid of it. And my manager is the person that told me to do it. She said, "It'll be fine." And she was right, it was.

Lex Fridman 4:52 What did it feel like? So that was the first fraudulent action you committed?

Matthew Cox 4:56 Yeah. I, I mean, I, you know, I was, I was worried. You know? I always say, you know, I sweated bullets for, you know, four or five days. You know, but I mean, I, I was concerned. And, and I don't know that I was concerned that I had broken the law, uh, I was concerned because I was behind on my, on my truck payment, I was behind on my mortgage. Like I had banked on being a mortgage broker and I'd gone deep, deep behind on all my bills to do this, so in the last minute when this loan isn't gonna close and I have to commit fraud to make that happen, and the idea, my fear was they were gonna figure it out and maybe I'd get fired. You know, I didn't think I was gonna go to jail because my manager assured me, "You're not going to jail." Like they'll, "You'll get fired at, at best." So my concern was they were gonna catch it and I'd get fired and I wouldn't get paid. Like I needed that money so bad.

Lex Fridman 5:56 So maybe paint the picture here. Where were you working? Who was the manager?

Matthew Cox 6:00 The manager wa- it's funny 'cause I, I...I don't think I ever really mentioned this. It, her name was, uh, Gretchen Zayas. She eventually, I don't mind saying it, but she eventually got, ended up going to jail for fraud.

Lex Fridman 6:11 Mm.

Matthew Cox 6:11 Uh, her name was Gretchen Zayas and she was the manager, I was working for a company called Eagle Lending and it was in Tampa. And I, this was, like, my first month. So it was my very first deal, three or four weeks into it, i- into that first month. And I walk in, I put the file in, in front of my manager. She looks through everything, you know, "Oh, great. Good, good." And put this one piece of paper over here.

Lex Fridman 6:39 Mm-hmm.

Matthew Cox 6:39 And sat there. And then when she was done, I said, "Uh, what's, what's going on?" She goes, "Perfect. File's perfect." She goes, "But your borrower's 30 days late on her rent." And she says that that's, "It's done." She's like, "That's a deal killer." And I was like, "Oh my gosh," you know, "What do I do?" And I remember she pulled out a wi- thing of Wite-Out. Remember the Wite-Out? Not the sticks, but the one, ch-ch-ch.

Lex Fridman 7:00 Mm-hmm, yeah.

Matthew Cox 7:01 And she started going, "Ch-ch-ch-ch-ch-ch." And I was like, "What?" She goes, "If I was you..." And she handed, she said, "I'd white it out, make a copy, stick it back in the file."

Lex Fridman 7:09 Yeah.

Matthew Cox 7:09 She said, "It'll be fine." And I went, "I could..." I was like, "That, that's fraud. I could go to jail." And she goes, and she was like, "It's, they're never gonna catch it." She said, "Look, I, we do stuff all, I do this stuff all the time." She said, "They're not gonna catch it. And nobody's calling the FBI." She goes, "The worst case that ha- that ha- worst case scenario, if underwriting catches it, then they'll fire you. That's it. Nobody's calling, you're not going to jail." And I was, you know, and I trusted her. I was like, "Okay." And so we, I, I did what she said, I stuck it in the file, and I mean, li- like I said, for fi- four or five days I was like, "Oh my God, I'm so scared."

Lex Fridman 7:45 How old were you at this point?

Matthew Cox 7:46 Probably 29. I think I was 29.

Lex Fridman 7:49 Okay.

Matthew Cox 7:49 You know, like, I had gone to college and so many things had not worked out. You know, I got a degree in fine arts. It's not, it's not a, uh, there's not a lot of people looking for anyone with a fine arts degree. And, uh, you know, I tried my, I tried to be a, uh, tried to be a, an insurance adjuster, tried that for about a year, year and a half. That didn't work out. Uh, ended up, ended up working construction for a few years and, you know. So finally the girl I was dating said, "You gotta be a mortgage broker." You know, she's just, had just started as a mortgage, in the mortgage industry.

Lex Fridman 8:27 Mm-hmm.

Matthew Cox 8:27 And she was like, "You have to do this. Like, you were born to do this. This is perfect for you."

Lex Fridman 8:31 What did she see in you?

Matthew Cox 8:32 She said, "It just, you're a salesman." And I was like, 'cause I was like, you know, I barely balanced my checkbook. Like, "I don't know, I don't know anything about numbers." And she's like, "It has nothing to do with that. It's sales. It's putting together deals. You know, you're good at that. You're good at negotiating. You're, you know, you're a natural sales- salesman." And I figured I'd, I needed to try something.

Lex Fridman 8:53 So what aspect of mortgages is sales and deal making, and what aspects require the charisma that you clearly have?

Matthew Cox 9:02 Well, one, you've got, you have clients that have lots of options. They can go to Bank of America, they can go to SunTrust, they can go to Chase. They have options if they have perfect credit. I ended up working for a company that was a subprime lender and those people didn't have a lot of options. By the time, honestly, by the time they got to that, to Eagle Lending, th- their options were over. So what ended up, ends up happening is you're negotiating with sellers, you know. You would think that a lot of the stuff that, in that industry that real estate agents should do, you know, the brokers end up doing. Because real estate agents are, are used to, you meet them at the house or they take you to several houses. They, you know, they, they open the door, they walk around. They write up a contract that's legit.

Lex Fridman 9:52 Mm-hmm.

Matthew Cox 9:52 A legit contract. And you already, you're already pre-approved. Everything works out. But subprime, that's not the case. You've got borrowers with horrific job history. They don't have enough of the down payment. They can't, maybe they have the down payment, but they don't have the closing cost, so you have to go to the real estate agent and say, "Listen, I need you to raise the purchase price and have the, the seller pay the closing costs." M- which is legal, but that's not, to a degree, but that's not how they wrote the contract. So now you're having to get them to rewrite the contract. Or you're have, you're, you know, there's little things you're trying to do. And the more, the more deals you get done and the more you deal with certain real estate agents, the more you start to realize that they're, you know, you know which ones are completely above board and which ones are willing to twist the rules.

Lex Fridman 10:49 And a lot of it works on personal relationships.

Matthew Cox 10:52 Right, right. For some reason, people tend to like me.

Lex Fridman 10:56 Mm-hmm.

Matthew Cox 10:56 And trust me.

Lex Fridman 10:58 Yeah.

Matthew Cox 10:59 (laughs) I don't know why. It's, it's, it hasn't worked out for so many people. But people naturally seem to trust me. And so if I say, "Hey, I can close the loan, but you gotta do this, it'll be cool. Don't worry, we do it all the time. It's like my third loan." And you know, I don't know, I've been doing this for years, and they go, "Oh, okay." And then they raise the purchase price, they add some money. They have the seller of the house give the borrower some money. They stick it in the bank or they put it in the, in escrow at the closing company. Like, now you're starting to massage deals.

Lex Fridman 11:30 What was the second time you committed a crime? So what, how did it start to evolve from the Wite-Out?

Matthew Cox 11:35 Well, I mean, when that went through, you know, I, um, I think a normal person probably would have said, "Wow, that was a one-time thing. Got away with it. Whew, I'm good." But for me, it, it just emboldened me.

Lex Fridman 11:50 Mm-hmm.

Matthew Cox 11:50 Like, I just got a check for, like, I don't know what it was, 25, $3500. I was thrilled. And by that time, I was already working on another deal. But that guy, he made, I forget, something like, he had made, like, let's say $45,000 the year before on his W2.... if you, based on his, based on his current track record or- or his year to date of his pay stub, he made just enough money. But if you factored in last year's W-2, he was shy. So if I changed that 45,000 to 51,000, then he could, the loan closes. I get a check for 3500 bucks. He gets into a house. I'm doing him a favor. You know? I'm doing God's work. So I fix it. It, I kick back. I'm terrified a little bit, you know, worried about it. Sure enough, it closes. Four or five days later, they call me. He's ready to close. A week later, we close. I get a check. Next guy that comes in, I mean, I- I got very, very quickly ... I was concerned. Do you have a house? Do you have a deal? Is it ready? I can get you, I could get you done. Now, if you were in bankruptcy or something, there's some things you just, that you'd pull their credit and you just couldn't help them if they were, if they had a 550 credit score or something and no job. I mean, you know, it had to be within reason. But very quickly, it was changing W-2s, changing pay subs, changing appraisals. Um, you know, fixing verifi- like I said, verifications of rent. So it evolved very quickly for me.

Lex Fridman 13:28 And you're essentially helping people.

Matthew Cox 13:30 (laughs) That's what I told myself.

Lex Fridman 13:32 Giving them a chance. People that have been really struggling financially in life.

Matthew Cox 13:38 Yeah.

Lex Fridman 13:38 So you've been telling yourself that this is, you're doing good, good thing for people.

Matthew Cox 13:43 I told myself that right up until, that those loans were solid and I was helping those people out right up until I went to prison. And- and I was in prison and I had to write ... The government asked me to write an ethics and fraud course for, to help teach the nation's mortgage brokers. Um, you know, all loan officers and brokers have to take, I think it's nine hours of continuing education every single year. And I was approached to write the ethics course. And it was about that time and about the same period of time I was writing, uh, writing a book, my book. And that kind of, you, I started reflecting on what I had done, you know? And the truth is, like ... And this is a horrible thing to say, 'cause the first time I ever heard somebody say this, I remember thinking, "Oh, that's a horrible thing to say." Some people should not own a house. They shouldn't be allowed to borrow. They're not in a position financially, you know? And- and there were, there were many occasions where I put someone in a house that they 100% swore they could afford. It was ... I was helping them. I told myself I was helping them. And a year and a half later, they're going into foreclosure. Their stuff's on the corner. They don't know where to go. And the truth is, is that I- I'm not smarter than the actuaries that came up with those underwriting guidelines.

Lex Fridman 15:10 So in this whole process, how are you making money? Are you taking a percentage?

Matthew Cox 15:14 Broker fee. Yeah, I charge a broker fee or you charge yield spread. So yield spread is, let's say the interest rate is 8% interest. If I charge them 25 basis points over the 8%, so I charge them eight and a quarter, you know, 8.25, then I get 1% of the loan back as a fee. So if I charge them eight and a half percent, I get two points back. So if it's $100,000 piece of property and the bank says, "Your interest rate is gonna be 8%" and I tell you, "8.5" and I'm charging you a $3500 broker fee, now I'm making $5500. So on even $100,000 loan, you could make a nice chunk of change. I mean, it's ...

Lex Fridman 16:04 So how much gray area is here? You said that there really isn't when you're lying or not, but-

Matthew Cox 16:08 I mean, you're- you're lying, but-

Lex Fridman 16:08 ... it feels like there is.

Matthew Cox 16:10 It ... Well, every time I changed something, it wasn't gray area. I just committed-

Lex Fridman 16:13 Right.

Matthew Cox 16:13 I just committed fraud. At this level, you're either, you either meet the guidelines or someone has massaged it in such a way that they've committed fraud. That's it. And there's, now, there's- there's tons of ways where you can commit fraud and they just can't figure it out. Does that make sense? Like, I- I mean, I've com- you've committed fraud and it's like they've looked at the entire, they look at all the documents and they double check everything and they know there's fraud in here and they just can't find it.

Lex Fridman 16:40 But just because they can't find it doesn't mean-

Matthew Cox 16:41 Doesn't mean it wasn't-

Lex Fridman 16:42 ... it's not fraud.

Matthew Cox 16:42 Exactly. Doesn't mean it wasn't fraud.

Lex Fridman 16:44 As part of this, you did a lot of fascinating things.

Lex Fridman 16:47 One of the things you did, you talked about creating synthetic people.

Matthew Cox 16:51 Right.

Lex Fridman 16:51 Meaning, uh, cr- (laughs) creating fake identities. What does, what does it take to do that, to do that well?

Matthew Cox 16:57 So your credit profile is made up of your, you know, your- your a- your name, date of birth, your address, and you know, your Social Security number.

Lex Fridman 17:07 Mm-hmm.

Matthew Cox 17:08 And, you know, those are the kind of ... You know, and then there's other things, where you work, that sort of thing. But what people don't realize is there's so many people out there that think that the credit bureaus already know who you are.

Lex Fridman 17:24 Mm-hmm.

Matthew Cox 17:24 Right? But the truth is, the first time the credit bureau has ever heard about you was when you told them. The first time you applied for a credit card, you cr- they created a credit profile at that moment. Prior to that, they had no idea. So the first time you apply, you give them your- your full name, date of birth, Social Security number, and your address. And they create a credit profile and they say, "Hey, no record found of this person. He has no credit, nothing. Probably got denied." Well, what I realized through the course of ... 'Cause e- eventually I end up leaving that one company and I opened my own mortgage company.

Lex Fridman 18:02 Mm-hmm.

Matthew Cox 18:03 When I opened that mortgage company-I was, I was on the inside. Does that make sense? Like, I wasn't a, I wasn't just a broker that was sitting out with everybody else and would periodically come in and ask questions, or would call underwriting and, but really didn't understand what was happening and what, exactly what the underwriting guidelines were. Now, I was actually talking to the underwriters, and you're, you're talking to the, um, to the owners of the lending institutions and the banks, and you're talking to all of the account executives. And now it wasn't just Eagle Lending I was talking to. There were 40 different account executives coming in on a weekly basis trying to get us to sign up with their lender.

Lex Fridman 18:44 Mm-hmm.

Matthew Cox 18:45 And they're on the inside telling you, coming in, showing you, uh, programs and saying, "Look, if your borrower is, you know, self-employed-

Lex Fridman 18:55 Mm-hmm.

Matthew Cox 18:55 ...we don't ask for this or this. We just ask for them to say they're self-employed." Like liar loans. You've, you've heard the term liar loans?

Lex Fridman 19:03 Nope.

Matthew Cox 19:03 Okay. Um, or no-doc loans, where they don't ask for any documentation. If he's got over, like, let's say, a 700 credit score and he says he's been a plumber and he works for himself then, and he's got over a 700 credit score, he just has to say he's worked for himself for over two years and...

Lex Fridman 19:17 They don't ask any other questions.

Matthew Cox 19:18 They don't ask for any documentation. He's got the money in the bank, he's got a 700 credit score, says he's been on the job for two years, he's self-employed, we're gonna raise his interest rate by 1%. And, and he's got ... You know, and that's it. He's, he's got the loan. So, but you start to, you start to know how things work, because I hired a bunch of brokers to work underneath me, and when they would get caught, I would get the phone call. So I get the phone call from the owner of a bank or a, a lending institute, you know, a lender, and that lender says, "Hey, Matt, we got a problem." I'm like, "What's up?" He's like, he's like, "Listen, uh, we, we caught a, a fake W-2." I'm like, "What do you, what do you mean?" "Yeah, your, your broker so-and-so sent us a file and this person had ... There's two fake W-2s and we're assuming the pay stubs are fake." And I'm like, "Are you serious? Well, how, how did you even catch that?" And they go, "Oh, well, here's what we did. We checked with sunbiz.com," you know, sunbiz.gov, which is the Secretary of State's website that registers corporations, "and we checked, and the tax ID number didn't match." And I, now I know every W-2 has to have a matching, uh, tax ID number for whatever corporation, uh, issued it.

Lex Fridman 20:34 So, there's a sequence of checks they do to detect fraud on different documents like W-2s?

Matthew Cox 20:38 Right.

Lex Fridman 20:39 And then you're s- slowly learning-

Matthew Cox 20:40 Slowly, yeah, exactly.

Lex Fridman 20:41 ...what's the process for detecting it. (laughs)

Matthew Cox 20:43 I mean, I had a pretty good understanding anyway.

Lex Fridman 20:45 Yeah.

Matthew Cox 20:45 But so I'm starting to learn that.

Lex Fridman 20:47 Just common sense understanding, yeah.

Matthew Cox 20:48 So I'm putting these things together, and I remember one time I had a woman come in, and she came in and she had perfect credit. She had like 750 credit scores. I mean, it was perfect. And she came in and, uh, one of the brokers came in and said, "Hey, man," he goes like, "Can I show you something?" I was like, "Yeah, what's up?" He, he goes, "Look." He said, "I've got this, this woman's W-2s here." I said, "Okay." I looked at them and he goes, "Here's her credit report." And he goes, "Here's the, you know, application. This is the, this is the Social Security number." I went, "All right." And he said, "This is the Social Security number on the W-2." And I went, "Okay." Keep in mind, you go to get a car loan or credit card, they never ask for these things. So, and he was like, uh ... I'm really shocked he even noticed it. I probably might not have even caught it, but he ... They were different. And I went, "Really?" And he goes, "Yeah." He said, um, "So I, I did ... You know, she just brought them in, you know, she's here." And I was like, "Oh, bring her in here." So she came in, sat down. I said, "Listen, here's what we just found." And she was like, "Oh, okay, you know what? I don't want the loan. I, I just ..." I go, "No, no, no, no." I said, "Listen, you're getting the loan. You got a 750 credit score. Like, I don't care what we have to do, we're getting you the loan. I just want to know what's going on.

Lex Fridman 21:57 Mm-hmm.

Matthew Cox 21:58 How are, how did you even, how did you get 750 credit scores under this Social Security number when clearly this is your real Social Security number? You've been working for this company for 10 years-

Lex Fridman 22:07 Mm-hmm.

Matthew Cox 22:08 ...and your credit profile says it's only like three years old." And I was like, "What happened?" And what she told me she did was, she had been ... She went through a divorce. She had been married for 10 years, used her husband's, I mean, his surname for 10 years. So she, she has no credit under her maiden name.

Lex Fridman 22:28 Mm-hmm.

Matthew Cox 22:29 But when they got divorced, she switched to her maiden name, um, because when she pulled, tried to get anything in her, in her, um, husband's surname-

Lex Fridman 22:38 Mm-hmm.

Matthew Cox 22:39 ...it was denied. Bad credit. So he had bad credit. Their credit went bad. So he switched to her ... He, she switched to her name, and a friend told her if she needed to get her electric or anything turned on, she could use her name and use her daughter's or son's Social Security number, which was like a four-year-old kid.

Lex Fridman 23:00 Yep.

Matthew Cox 23:00 So she used that and it went through. She had to put a deposit down, but it went through at least.

Lex Fridman 23:05 Mm-hmm.

Matthew Cox 23:05 Wasn't denied. So that went through. Then she went and she applied for an apartment with that.

Lex Fridman 23:11 Mm-hmm.

Matthew Cox 23:12 Sure enough, it went through. She had no credit, but they said, "You don't have bad credit." So she said once she moved into the apartment, she then started getting these pre-approved credit cards. So she, she goes, "But I knew I had applied there using my son's Social Security number," let's say. So she started filling those out, and sure enough, she got a credit card and then she got two, and then she got a preapproval from Ford Motor Credit. She went and got herself a new car, got approved. She'd been making the payments ever since. She has 750 credit score. She thought she'd try her hand at buying a house in his name, in his Social Security number, and, uh, we caught it. And she got a house in that name, and we c- we closed it. I just was like, "Wow." Like, "This is great."

Lex Fridman 23:53 Can I ask you a question about that? Because it seems like she's able to pay for everything.

Matthew Cox 23:58 Right.

Lex Fridman 24:00 So, while this is highly illegal, is it unethical? Is it like ... It's, it's unethical in that it's messing with the system on which a lot of people rely-But it feels like s- there's some aspect of the system that's broken, in that it doesn't give people like her a second chance.

Matthew Cox 24:19 She could have claimed bankruptcy, and then two years later... Listen, two years out of bankruptcy, you can go into Bank of America and get a conventional mortgage, assuming you have perfect credit outside the bankruptcy, you have the down payment, you make enough money. There's a whole bunch of, you know, cr- uh, a bunch of, uh, underwriting guidelines you have to meet. But that's possible. But you're right. For instance, she wasn't getting an apartment a- using... With her bad credit, she wasn't getting her utilities turned on. She wasn't getting any of those things done.

Lex Fridman 24:48 So getting your life back on track is just harder.

Matthew Cox 24:50 It's extremely hard.

Lex Fridman 24:51 So there's a temptation to take the shortcut, and the shortcut is often going to be illegal.

Matthew Cox 24:56 Right, and she stumbled into it.

Lex Fridman 24:58 Yeah, right.

Matthew Cox 24:58 But she basically explained it to me and I... I mean, I don't think she had walked out of the, of my brokerage office before I went and I just started making up, you know, names and... I think I went, I went in- into our file cabinet and grabbed some people's, uh, 1040s which we had, you know, their tax returns and looked up children's Social Security numbers, and just grabbed some random kids' Social Security numbers and their name and went and pulled them, and sure... And, you know, but I changed their date of birth to be an adult. Pulled it, and sure enough it came up, "No file found." You know, it didn't say fraud alert or fraud or anything. It didn't say, "Mismatch this, mismatch that." It didn't say anything. It just said, you know, "No file found." Well then we went and we pulled... Applied for a couple credit cards using a child's Social Security number, and then we went and pulled our own credit report, and sure enough, it didn't say, "No f- no file found." It just said that there had been two inquiries applying for credit cards. So I was like, "Oh, wow!" Like, "That's a credit profile." So that turns into me going to Social Security and calling S- or calling Social Security and trying to get them to issue me Social Security numbers to adults that had never had a Social Security number issued to them. Like, I need to get Social Security number to give me a clean Social Security number. But I called up and of course, you know, I- I'm a novice. I don't really know what I'm doing. So I'm- I call up and I say, "Hey, uh, yeah, I was... I'm, uh... Never had a Social Security number issued." And they were like, "How old are you?" And I was like, "Um, 31 years old," you know? And they were, "Yeah, that's not possible. Do you have a driver's license?" "Uh, y- y- yeah." "You have a bank account?" "Yeah." "You have a Social Security number." Uh, "Bring your driver's license in and we'll, we'll pull it up." "Okay, well, that's not gonna happen." Hang up, call back. "Hi, um, my son is seven years old or three years old and he, he had never had a Social Security number issued." "Oh, okay. Was he born in a hospital?" "Yes." "Well, he has one. He has one. Go ahead and, uh, get your son, come in here." No, I'm not doing that. Hang up, call back. So I called back probably 10 times and eventually, uh, someone said... I, I kept altering it. Kept altering what I was saying till I got to the point where I was saying, "My son was born with a midwife, not in a hospital. And the pediatrician told us that we needed to go, we need to get Social Security to issue a Social Security number." And they would say, "Well, he should have issued it, but that does happen sometimes. So bring your son in and we'll... You know, you can fill out the paperwork, we'll have one issued. You know, first we'll check to see he never had one issued and if he hasn't, we'll issue one." And so then it turned into, "My son is out of the country and I need this," and then that turned into, "Oh, I'm sorry. Well, how old is he?" I was like, "Um, you know, he's three." And they go, "Well, I'm sorry. If he's over the age of 12 months old, he has to come in." Hang up the phone, call back. "My son is 10 months old. He's out of the country, born with a midwife, never had a Social Security number." And then they go, "Oh, okay. That's fine. Just get his birth certificate and a shot, his shot record and you can come in, fill out the paperwork. We'll g- issue you a Social Security number." And that's what I did. So I figured out how to create a s- a birth certificate, you know? I ordered the security paper. You know when, uh, where you, you make a copy it says, you know, "Void if copied."

Lex Fridman 28:44 Mm-hmm.

Matthew Cox 28:44 So I ordered, had to order a bunch of that and I went online and figured out how to make a, a fake birth certificate. It was great too, 'cause like the county actually, they give you a, a blank form and then they actually show you what it looks like filled out, like a handwritten one filled out. So I knew if he was born this day, he got these shots. Um, two months later he got these shots. Six months later he got these shots. So I just filled it out. I even had to order a, a seal. So you have to have a seal that says like, "Hillsboro County Vital Statistics" or "Richland County Vital Statistics" or something. And I couldn't get anybody to make that, so I changed it to like, "Richland County Office of Virtual, um, Records." And then I took like 220 grit sandpaper and, and, and hit it over and over and over again to wear it down and then I sta- you know, I did the embossment on the, on the corner and, you know, I printed it on the security paper, embossed it. Nobody looks at those things. You could see Richland County, you know? You could s- you could kind of see that, and that really, they just grab it and they go like this. This is what you realize after you... When I started getting, started getting, uh, driver's licenses issued by, uh, by the state DMV, right? The state... I- I figured out eventually it was easier to just go into the DMV and have them give me a driver's license than actually make one. So, but you notice they would just grab the thing. They'd feel the form and go, "Okay." Like, they don't even look at it.So, which is upsetting if you put as much work into these documents as I am, for them to go, "Okay, yeah. That's good. Sit over there." I, I felt like going like, "Hey bro, like take a look at this. This is artwork."

Lex Fridman 30:25 Yeah. (laughs) But they're looking for the low hanging fruit of crappy fraud.

Matthew Cox 30:31 Right, yeah. This stuff was right through, so.

Lex Fridman 30:34 Okay, so, so birth certificate gets you a, uh, Social Security number. So it's, it's interest- it's interesting 'cause you've also, you, you've done a lot of different approaches to, um, creating synthetic people.

Matthew Cox 30:49 Right.

Lex Fridman 30:49 There's homeless people involved. So sometimes it's grounded in real people or real names, and then you're-

Matthew Cox 30:56 Right.

Lex Fridman 30:56 ... like some part is fake, some part is real sometimes, and sometimes it's completely all fake.

Matthew Cox 31:00 Right, 'cause now I have the name, I have the Social Security number, and what's great is they mail you. What's even better is you get, then you get to pick whatever name you want, you know? 'Cause when you pick your child's name, he doesn't even have to have your last name. You can pick any name. So I would pick a name and I'd just say, "Oh, my wife's last name is this," if it, they questioned it, which they never did. But, you know, I've got a Social Security number, and then I would go apply for credit cards, and I'd get denied of course, but they would all offer me a secured credit card. So I, I then fill out the secured credit card and I'd send them, send the bank the money, and they would give me a secured credit card for $500, $300, a thousand, whatever it was. And then once you start making the payments, I pulled the credit and a credit profile shows up saying that this 31-year-old man with a Social Security number that I know was issued, you know, a couple months ago, has three s- three credit cards. They don't even say secured. They just say there's like, this credit card is $500. It was issued by Bank of America. This one was issued by Capital One, this one was... So I've got three of them, but I had no credit scores. So at that point I kind of kicked back and waited, and I just kept making payments. And I remember thinking to myself, "I'll bet you they don't, that the credit bureaus don't generate credit scores for at least a year." And I was like, "God, this is gonna be a yearlong process." And while that was happening, I started other, I was starting other ones 'cause I figured at least in a year I'll have a bunch of these secure, you know, these, um, we call them like phantom borrowers, but now they call them synthetic identities. So at least I would have these synthetic identities and maybe I could do something with them. But what happened was at six months, I went and I randomly pulled the guy's cred- you know, the person's credit, and they had 705 credit scores, 705, 701, 695. I was like, "Oh my God." You only needed a 620 to borrow, to get a 95% loan from the bank, so I was like, "Oh my God. This is ins- this is amazing." Sure enough, a month later, the other ones I had started, all of them bam, bam, bam.

Lex Fridman 33:12 Mm-hmm. So what do you do with a phantom borrower? Like what, how do you make money on this?

Matthew Cox 33:17 So I think most people, if you were just like a scammer or fraudster, you would, you would probably just get credit cards and maybe build up that history or maybe try and borrow a personal loan, uh, which is limited. You know, it's, personal loans are, used to be, used to be you could go to, uh, an FDIC insured bank, which borrows money. Those, you know, the personal loans they lend out, at the max $15,000, you know? So you could do that.

Lex Fridman 33:52 So you can go through this whole process of creating a fake identity, getting a card, paying it off, building up credit, and then you get $15,000 at the end or so.

Matthew Cox 33:59 Right. You get 15 maybe, you know, if you want to keep making the payments, you know, if you could wait a year, you could probably get 15,000, uh, maybe. You could maybe get 20, 30,000 in a bunch of little smaller ones, you know, get 7,500 'Cause I did, I did, there was a $7,500 from Citibank, you know, $5,500 from American General. So you maybe get what, 25,000, you know, maybe 30,000 in personal loans. Maybe you can, you could, you could then apply for, you could maybe get another 20 or 30,000 in regular credit cards, you know, 10,000 here, 8,000, 5,000. And then you go to the lower department store cards and you go to Home Depot, you get a thousand, you get 500. So it ends up being maybe you can get 50, 60,000. Maybe if you really good, you could get up to 80 or $100,000 in credit cards and personal loans if you really knew what you were doing. But-

Lex Fridman 34:49 Per person, per identity.

Matthew Cox 34:50 Per identity. But I had the ability to, to leverage that perfect, those perfect credit profiles against properties. And I mean, ultimately that's what I ended up doing. And, and so each one of those identities was worth, you know, a few million.

Lex Fridman 35:09 Can you explain how that works? So, uh, to leverage them against property. So how does that work with a mortgage?

Matthew Cox 35:14 So what I did-

Lex Fridman 35:15 Yeah.

Matthew Cox 35:15 ... eventually-

Lex Fridman 35:16 Mm-hmm.

Matthew Cox 35:16 ... I mean this was like is down the road, but you know, I mean at this point when things are just, my whole life had kind of gone off the, the rails. I was on federal probation and, and so what I did, decided what I was gonna do was start running a scam, a much larger scam. And what I was going to do was, uh, uh, I was gonna start flipping properties, right? Like buy houses cheap, fix them up and sell them. There's an area of Tampa called Ybor City. So I was gonna start flipping houses in Ybor City. And, you know, I thought, "Okay, I can, I can buy these houses for..." You could buy a really crappy house at that time for 50, $60,000, let's say 50, and then you could put $25,000 into it in renovations. You could renovate it for 25 and maybe you could get an appraisal for 100.

Lex Fridman 36:08 Mm-hmm.

Matthew Cox 36:09 So I thought what I could do is I can, I can buy these houses, renovate them and sell them to, you know, regular people.... but I also had been working on the synthetic identities. And then I thought, "Well, or I could just sell them to synthetic identities," and then I wouldn't have to dump 25,000 into it, right? And these guys are perfect. They have perfect credit. I can provide W-2s and pay stubs because by this point I'm manufacturing businesses. So I've got, I've got... I've incorporated businesses, I've got websites for the businesses, W-2s, pay stubs. So these guys have, these guys look perfect. So I figure I'll buy these properties for 50,000, sell to these guys for 100. Maybe I'll pocket 40 or 50,000. I don't really have to do anything. But that seems shortsighted. So I thought what'd be even better is that if I did a little bit of renovations and then I sold it for much higher. Maybe I put 10,000, clean up the outside of it, 'cause these guys don't care what the inside of, of the property looks like, you know. They, they're not, they don't exist. So and then I, but I can't, how am I gonna get an appraisal for $100,000? Well, do you, you know how appraisals work? Okay. So the bank sends a, an appraiser out or at that time you could provide an appraisal. They can review it. So they'll do what's called a desktop review. They review it, they review it on, um, on the computer and they never go out to the property. Or they send someone out. They, they call that, you know, it's like a field review. They send someone out and they just look at the house. They don't go in it, though. So I have to clean out the, clean up the outside of the house. So what I did was... But the problem is, is if your house is, you're trying to sell that house for let's say 200,000, the other houses, they have to pick three comparable sales in the area that are also going to support a th- a $200,000 sales price. Well, there's no other houses selling for 200,000 near this house. So I thought if I wanna get these things appraised for 200, 250,000, I have to sh- have comparable sales and that appraisal's going to be reviewed. So what I did was I started, I went out and I bought this house for 50,000 and I recorded the sale at 200,000. So when you buy a house for $100,000, you pay $700 in doc stamps. But if you pay the extra, an extra 700 bucks, the sale shows up for 200,000. Well, I'm buying these things for 50, so I'm paying $350 and I'm just paying an extra $1,050. So I'm, so it ends up being four- you know, $1,400. But the, but the sale shows up at 200,000 on a house that's a, a crack house I bought for $50,000. Now I go, I trim the trees, we mow the yard, we clean up the porch, we put the porch rail on maybe, we paint it real nice. We black out all the windows. You can't see inside. Uh, but from the sh- from the curb, it looks great. And I get an appraisal. So I do that with that house. I do that with another house all within a mile. So I buy four houses knowing I could use th- the all, there's a subject and three comparables for all of them. So the first thing I did is I bought four houses for 50,000, 60,000, 40,000 and I recorded the values at, you know, 210, 200, 190. So I get an appraiser to come out there, he appraises it. He said, of course, he says it's horrible, but there's comparables here. Now of course it is in bad shape and he says it's in bad shape, but I, I go ahead and I correct all that. So I correct it. So now if you, if you review the appraisal and you're in California or even if you drive your car down your, the appraiser comes to the house and looks at it from the street, it looks fine. But the truth is I've got $60,000 into this property and you're appraising it for 200,000. So the bank's ready not, they're not gonna lend 200, but they'll lend 190. So the bank is ready to lend this synthetic borrower $190,000 on a house that I have 60,000 in. So I wa- so I schedule a closing and we close on the house and I walk away with $60,000. You know, and, and the thing is like e- th- the problem was, is by the time I got to this point, I knew so many people in the industry. I, nobody had to really at that point show up. Al- although I've had people show up for the synthetic identities and sign for them. M- almost all the closings, nobody ever showed up. I just showed up and said to the title, uh, to the title agency and said, "Hey, my borrower, he's at work right now. He can't make it. Can I just take the file and I'll have him sign all the documents at his work and I'll bring them back? He's like an hour and a half away from here. I'll be back in two or three hours." They're like, "Oh wow. Th- man, Matt, thank you so much." And they would give it to me and I'd go sit in the parking lot and I'd sign all the documents and I'd wait a f- an hour or two and I'd come back in and say, "Here you go."

Lex Fridman 41:32 Uh, how were you able to keep all of this in your mind? Because you have to not slip up in any of these conversations.

Matthew Cox 41:37 It's pretty easy for me to, for me to keep them everything in the correct category.

Lex Fridman 41:47 Sure.

Matthew Cox 41:47 Does that make sense? Like it's, it's... I'm not great at a lot of things, but this I was very good at.

Lex Fridman 41:53 Well, the, there's these phantom people that exist and they were becoming real people in your mind, as in like you're able to tell good stories with, with those people, right? Like 'cause if you're talking to the appraiser, if you're talking to the everybody inv- involved.

Matthew Cox 42:09 Well, keep in mind, the appraiser almo- almost never meets the borrower. Never. N- not even almo- like 99.99, 99% of the time they never meet them.

Lex Fridman 42:17 But you have to talk about them.

Matthew Cox 42:19 Yeah.

Lex Fridman 42:20 So y- I guess what I'm asking is you're able to converse fluently about these synthetic identities?

Matthew Cox 42:26 Yeah. They, they all had different jobs.... they all had, they, all the jobs were basically, they were all on the job for five years. They were all, it was, a lot of it was-

Lex Fridman 42:34 Yeah, sure. There's a template.

Matthew Cox 42:35 Yeah, exactly. But-

Lex Fridman 42:38 I got it.

Matthew Cox 42:38 ... yeah, listen, all, matter of fact, almost every one of them had the same birthdate, you know. So, because I, you know, who knows? Um, there's, so, it, it, yeah, it wasn't difficult. And keep in mind the, a lot of the, the brokers barely ever meet, um, meet the borrower. They call in on the phone, but it didn't matter anyway 'cause I'm walking in saying, "I got a slam dunk deal for you."

Lex Fridman 42:58 Mm-hmm.

Matthew Cox 42:59 And they're like, "Oh, wow, Matt, you got the W-2s, the pay stubs. You've got all the, you got all their, uh, their rental history. You have everything done. It's perfect. Thank you so much." They're happy to do it. "Hey, I, print up the docs and I'll have them go sign it." "Great. Wow, thank you." You know, assuming they didn't already know about it. And almost everybody involved in this, by the time I was done, was involved. There was probably 15 or 20 people that all knew what was going on.

Lex Fridman 43:23 The full of it. They knew the full depth of it.

Matthew Cox 43:26 Yes. Th- uh, yeah. At l- yeah. Maybe not 100% everything, but they definitely knew this is fraud.

Lex Fridman 43:32 And they were still g- going along with it.

Matthew Cox 43:34 Yeah. Yeah. Y- keep in mind that, even when, I give, give you an example. One of my, you know, let's say, and this happened with almost all of them, was he would buy five houses. So the guy bought, what happens, the, the basic design was I buy the houses, I record the values higher, and this person buys all five houses, refinances them. He ends up borrowing a little bit over a million dollars in his name. Uh, then of course, then I go and I, I get, um, personal loans from several banks. I get credit cards. I run up all of his credit cards. By this point I've got 10, $20,000 worth of credit cards in the guy's name. So the guys are all worth like a million, million and change. Well, once I stop paying, you start getting letters from the collection companies, right? From the banks, you know, and then they sell them off. So after about three months, you're getting tons of letters. And what I would do is I would take my borrower's name, I would go online and I would find, or I'd go in the newspaper and I would find, I would find an article about, let's say, like a 12 car pileup.

Lex Fridman 44:52 Mm-hmm.

Matthew Cox 44:52 You know, so there's, you know, this huge accident on I-4. It's very dangerous. So there's a 12 car pileup and someone in the accident was life-flighted to Tampa General Hospital.

Lex Fridman 45:03 Mm-hmm.

Matthew Cox 45:04 I would cut and paste that article and I would just insert my borrower's name into the article saying that, you know, Brandon Green was life-flighted to Tampa General Hospital, is currently in critical condition. I would then print that article out on newsprint. I'd then make a copy of the, cut it up, make a copy of the newsprint, highlight his name, and I would write a letter from Brandon Green's fictional sister to the collection companies saying, "Several months ago, my brother was in a horrible car accident. He is currently..." They've got the article, they have the highlighted name. He clearly was in, in this, uh, in this accident. "He is currently in a coma and the doctors say even if he wakes up from the coma, he will never work again." That, you know, so you might as well just foreclose on, stop writing us letters and take the houses back. And that's all they're looking for is a, is, is a reason. At this point, even if they look into Brandon Green, they can't figure out if he's a real person or not, because he's got a Social Security number. He's got... And everything went bad at the same time. He's got multiple rental properties or his primary residence, all of his credit cards went bad, everything went bad. We have an excuse. We have a letter. That happens. People get divorced. They lose their job. They get in accidents. It's reasonable.

Lex Fridman 46:27 When they look into it, it all looks legitimate.

Matthew Cox 46:30 Even if they ordered another appraisal. By this point, it's not four comparable sales or three or four comparable sales. By this point it's like 10, 15, 20, 30, 40, 50 'cause I kept m- making more and more of these guys.

Lex Fridman 46:43 What was your, just a, almost like a tangent, what's your thinking process? There's a lot of cleverness going on here. So like, uh, the, the car pileup is a solution, newspaper and you mail it. Wh- are you sitting there alone and thinking through this? Like, how do you come up with that idea? Because it's a-

Matthew Cox 47:02 Um-

Lex Fridman 47:02 ... it's a very interesting and very clever, innovative idea.

Matthew Cox 47:05 So at first I, I had thought about making like a, a fake death certificate.

Lex Fridman 47:10 Mm-hmm.

Matthew Cox 47:10 That he died, you know, but I thought, "Oh, I don't know. Like, what if..." You know, like some of these places had like, you know, uh, you know, primary mortgage insurance. Like, what if the primary mortgage insurance, like what if they try and claim 'cause he was dead or like, I don't know. I don't know that side. So I'm like, "Ugh, I don't want to do that." I want to do something that's semi-verifiable and third party. It's like a third party telling you this is what happened. I thought, well, like the newspaper, you know? And you know, or do I claim bankruptcy? And I've done that. I've gone and got the bankruptcy forms, right? You can go to the bankruptcy court and they'll give you forms to mail to all of your, uh, creditors and you mail them. They stop contacting you. They wait to be no- located by or notified by the bankruptcy court. But my fear there is, you know, uh, nobody's ever gonna notify them. Like, I'm not going through bankruptcy for one of these guys. So it was like, this is a, this is a better bet than just writing a letter saying, "I'm going through a divorce. My wife's keeping those houses. That's her problem." You know, you could, there's lots of things you could do, but to me this was-

Lex Fridman 48:13 Yeah.

Matthew Cox 48:13 ... they're not gonna try and how do you, how do you shut it down without him dying? How do you shut that down? This is how you shut it down. He's in a coma. He'll never work again. He was in a car accident. Here's the proof. He can't even write you. I'm his sister. I wrote you the letter.

Lex Fridman 48:29 It's a one-time letter that seems to, um, tie up all the-

Matthew Cox 48:32 Tie, exactly.

Lex Fridman 48:34 ... loose ends.

Matthew Cox 48:34 Exactly.You know, I could, I don't know the exa- exactly how that, you know, what sparked that, as much as there were so many other avenues that I could have gone that I was, I just didn't know. I was concerned.

Lex Fridman 48:46 But you were thinking through all those different avenues?

Matthew Cox 48:48 Yeah.

Lex Fridman 48:48 Are you mostly thinking alone?

Matthew Cox 48:50 Mm. I mean, you know, I had guys I was bouncing-

Lex Fridman 48:53 Ideas?

Matthew Cox 48:53 ... ideas off of. There were other guys that were involved in the scam, you know. Ev- everybody... I think that scam ended up making, like, I think the FBI said it was, like, 11 and a half million or something, and, and, you know. But, but there were so many other people that were involved in that scam that were, you know, this guy's getting 50, this guy's getting 20, you know, 17,000, 20,000, 25,000 and you know, the whol- we're just doing it constantly. And so the bank would foreclose on that property, they'd take it back, they'd put it back on the MLS. They'd put it back on the MLS for 100, for 200,000, it wouldn't sell. Then they'd drop it to, you know, 150, wouldn't sell. Then they'd drop it to 125, 130, wouldn't sell. They'd drop it to 90, and somebody'd buy it for, like, 90. It wasn't worth 90, but by that point, that whole area had sh- we'd done so many houses at that point, the whole area shot up. The, the FBI said, uh, we did 109 houses. I don't think that's true, but...

Lex Fridman 49:53 Wow.

Matthew Cox 49:54 We, we... When I end up leaving Tampa after that scam falls apart and the FBI shows up, Forbes came out with an article, whatever, six months later, and they said that the Ybor City zip code was one of the top 20 fastest growing z- um, appraising areas in the country. And, you know, everybody was like, "Oh, that's mad, 'cause this place is a dump. Like, this is just a horrible place." Like, this is... And I remember one time, I had talked to a guy, you know, years later, and he was like, "Ugh, all the comparable sales have dried up. Like, when you left, (laughs) there was just nothing even close to 200,000."

Lex Fridman 50:33 You mentioned right before, uh, telling the story of this elaborate scam that you were on federal probation. How did that happen?

Matthew Cox 50:41 So, I mentioned that I, I own the mortgage company.

Lex Fridman 50:43 Yes.

Matthew Cox 50:43 Right? So I, I had started a mortgage company. I had maybe a dozen guys working for me. And, and there was fraud, you know. Like, I would say it wasn't all fraud, but whatever, 60, 70% of it was fraud that was going in there. And from the outside of that, that business, it looked very legitimate. You know, we were an FHA approved lender, we were a VA approved lender, we did conventional, probably signed up with 40 or 50 subprime lenders. Um, but, but there was a considerable amount of fraud and, you know, and it kept getting, you know, it- it became a game, right? You know, it... You start, you start... I started getting just more and more creative. Like I, like I said, every time I would get away with something, like, you become emboldened by it. It's like, "Nice." You know, like, "Hey, the underwriter's looking for this and looking for this," and you sit there and go, "Man, so then she's..." You know, "That's... What am I gonna do? What am I... You know what we could do? We could create our, create our own bank. What? Yeah! Here's what we're gonna do. We're gonna go on..." Like, how do they know if this bank exists? Th- these people are in California or they're in New York. Like, they don't know. So what we're gonna do is we're gonna go online, and keep in mind this is 2000, you know, this is 2000, 2001. Like, this is... The internet's in its infancy still, right? So we figure out, and I remember GoDaddy I think had just come up with a site where you could build your own website. Like, how cool is that? So I go online with a buddy of mine and we create something called the Bank of Ybor. You know, we cut and pasted things that we liked from other banks and we got a 1-800 number you could call, or a 1-86 number, whatever it was, and you could call it and it would go to a voicemail. And so we set up this bank, and then I ended up making bank statements, which by this point I already had been making bank statements to, to prove someone has their down payment, 'cause a lot of times people, they have good enough credit to borrow, 95% or 90%, but they don't have their down payment. So we'd raise the purchase price high enough to cover their 5 or 10% down payment, and we would bring their down payment for them, or we'd have the owner of the house bring the down payment for them, and then we would have a check cut out of the closing statement to a construction company that I owned and we'd get our money back. So, they get into the house for 100% financing or 110%, some of them turned into 130, we wanna pay off their car, give them an incentive to sign. Um, they don't ha- still won't have the money to buy it. So we're doing all kinds of insane things. Well, at some point, remember Gretchen Zeias, my, um, my old manager?

Lex Fridman 53:32 Yeah. The original.

Matthew Cox 53:33 Yes.

Lex Fridman 53:33 The OG.

Matthew Cox 53:34 She came and worked for me for a short period of time and then she and her husband went and opened their own mortgage company, which you should've known it was gonna be fraudulent from the get-go because it was called Creative Financing. It was, it was, yeah, Cre- C- uh, CFM, Creative Finance, no, Creative... (laughs) I was...

Lex Fridman 53:54 Creative was in the name.

Matthew Cox 53:55 Yeah, yeah. Creative was in the name.

Lex Fridman 53:57 Oh, boy.

Matthew Cox 53:57 Um, so-

Lex Fridman 53:59 That's really on the nose.

Matthew Cox 54:00 So she, uh, she's doing very well and, and we became very close, by the way. We're, we'd go on vacation, went to Puerto Rico together. Um, I'm, I got married at the time. I got m- I was married. Our kids, you know, play together. We babysit, we go to each other's parties. We're close. We're good friends. And she's got her own mortgage company. She calls me up periodically and asks me, "Hey, can you make a W-2?" Or, "Hey, can you make me a pay stub?" "Sure, no problem." We're friends. That's what fraudulent friends do. So, you know, if I needed somebody to, to verify rent or verify somebody's, um, rental history or employment-She had cell phones she would answer, that sort of thing, for me. Well, what ended up happening is, um, she gets in trouble. She starts doing fraudulent loans for some guys, you know, and these guys are doing what's called a cashback scam.

Lex Fridman 55:05 Mm-hmm.

Matthew Cox 55:05 So they're, they're getting like a half a million dollar loan on a house that's worth $300,000. So they're getting a, uh, they're buying the house for, whatever, 600,000. It's really only worth 300, 350. But she happened to be in an area where she could get it, the appraisal jacked up. So they, they buy the house, they get $200,000, $300,000 back and, um, it's, it's a, it's a straw man scam, right? It's a cashback straw man scam. So this is a real person that's buying the house. He's got perfect credit, but he's willing, he's willing to let, to ruin his credit to get a couple of hundred thousand in his pocket. So he never has any intentions. So it's not a synthetic identity, it's not a stolen identity, it's a straw man. He's a fake, kind of a, not a fake person, but he's just a straw man. He's a stand-in. So he stands in, he signs the paperwork, he buys, buys the house. They end up getting 200, 300,000. Well, this guy buys like five houses. So it's 2, $3 million. They've lost 500, 600, 600, $700,000 and these guys never even make the first payment. They just let them go into foreclosure. So the bank immediately investigates and realizes this is fraud. So the FBI comes in, they grab Pete and Gretchen. She has to hire an attorney, of course, and she doesn't get thrown in jail or anything. They just come to their office and they, they tell them they're investigating them, they know what's going on and they, they want to talk to... They're like, "Well, look, we want to talk to you and you're going to be indicted." "Okay." So she comes to me... Well, actually, Pete came to me and said, "Look, man, can you refinance our house and get us 75,000 out to pay our attorney?" I said, "No problem." Um, Gretchen gives me W-2s, pay subs, fake, the whole thing's fake. I get her, I refinance, I get a second mortgage on her house, $75,000, they pay their attorney. Their attorney immediately says, "You need to wear a wire on this guy. He just got you $75,000." You know, "I don't know how you got $75,000," but the attorney knows something's wrong 'cause the attorney's like, they just, "Your whole mortgage company was just shut down. There's no way you could borrow $75,000." So he's like, "This, this guy's doing fraudulent stuff," and she says, "Yes, of course he is." And he says, "You need to work with the FBI, wear a wire against this guy." So she calls me one day and says, "Listen, I gotta talk to you. The FBI's asking questions about you." And I go, "What?" And she goes, "Yeah." And I was like, "Um, meet me at the pizza place down the street." So, you know, don't come into my office 'cause everybody knows she's been indicted. Like, everybody in her office quit-

Lex Fridman 57:29 Mm-hmm.

Matthew Cox 57:29 ... when the FBI... If the FBI shows up and gives you a business card and announces they're the FBI, everybody quits. So I said, "Do not have, do not, don't, don't come here 'cause they already know, they're already concerned." So I go and I meet her and Pete and we sit down at the, uh, at a restaurant, you know, a little pizzeria. And I sit down and she starts telling me that the FBI's asking questions about me and I'm like, "Well, what are you talking about? What are they asking?" She goes, "Look, they came in, they took all our files," and like, I was like, "I don't know any of this." I'm like, "When did this happen?" She's like, "Yeah, a couple of weeks ago and they, they, and they have some of your files." 'Cause I had closed several loans for my wife at the time. We were buying rental properties. My wife didn't have a job. So there, there, it's all fraud, but I couldn't close... I could not close those loans in, at my mortgage company because I owned the property, so I'm selling those properties. I bought properties, renovated them and sold them to my wife to get around something called seasoning. Seasoning says you have to wait six months to a year to refinance at the market value. Otherwise, if you wanna refinance, that's fine, but you have to refinance at the price you purchased the property at. But I bought these properties for 80 or 100,000, renovated them, sold them for 200, 300,000 to my, my wife who got a very, didn't even get a big mortgage. We were just trying to kind of get around a, a, um, a guideline. So, but my wife was not working and I provided W-2s and pay subs. So when she says all this, she says, "Yeah, they're looking at, at your, the loans you gave me, at, at your wife's loans." And I went, "Oh my God." I said, "Well, you didn't tell them that the W-2s were fake, did you? You didn't tell them the pay subs were fake, did you? You didn't tell them that the down payments were... You didn't tell them that we were married, did you?" I mean, just absolutely buried myself.

Lex Fridman 59:26 Yeah.

Matthew Cox 59:27 And as I'm telling her this, I was like, oh, I, I, I, I was like, I, I kinda caught myself and I went, "Okay, wait, wait, wait a minute. Look. Okay, here's what you're gonna tell them. You're going to tell them you never met her. She called on the phone." Like, I start trying to devise a plan that will answer their questions without getting my wife in trouble or them in trouble and if nobody cooperates, the whole thing should shut down. You know, they st- it doesn't go anywhere. There's no way, there's nowhere for them to go. Everybody just kind of stonewalls them. So as I'm saying all this, Gretchen says, "Matt, we can't lie to the FBI." And I go, "What are you talking about? You're already lying to the FBI. I mean, you, you, you know, you, you've been lying to the FBI. I mean, I just refinanced your house." And before I can really say anything, Pete jumps up, her husband stands up and he says, "We've never lied to the FBI. We may not have told them everything, but we've never lied." And I thought like, "What, what, who? Who are you talking to?" Like, I know that's not true, so you're not saying that for my benefit. So I was just, I kind of look at him and I'm like, "What?" And I just, I remember looking down and, and this may mean nothing, but both of their cell phones were right next to me.

Lex Fridman 1:00:40 Mm-hmm.

Matthew Cox 1:00:41 Right? And I remember-... they were probably just wearing wires. But I just remember thinking, "Those cell phones are microphones."

Lex Fridman 1:00:48 (laughs) Yeah.

Matthew Cox 1:00:49 They probably weren't, but I remember thinking, "Oh, wow," and I just, I looked at her and I went, "Wow." And I said, "Well, I hope you're gonna get something for this," and she immediately starts crying, and she says, "Matt, I'm sorry. I, I have a kid. I can't go to jail."

Lex Fridman 1:01:07 Did you have kids at that point?

Matthew Cox 1:01:08 Yeah, I had, like... I have a kid. Like, I have a kid. And I was like, "Wow," I... "Wow."

Lex Fridman 1:01:14 What have you learned about friendship from that, like loyalty?

Matthew Cox 1:01:18 Oh, yeah, there's no... There's... That's, uh... That's... It's sweet.

Lex Fridman 1:01:21 That must've hurt.

Matthew Cox 1:01:22 It's cute. (laughs) I mean, I, like, love the idea of it.

Lex Fridman 1:01:25 You don't think that...

Matthew Cox 1:01:26 No. E- I'll tell you why. So I go back to my, I go back to my office. I remember I told her, I said, "Tell the FBI agent to call me on the phone. Do not come in my office." So I go back. I'm still trying to figure out how to weather this, right? I go back. I sit down. Phone rings. Uh, my secretary comes in and says, "Hey, Agent..." I'll never forget the guy's name, (laughs) Agent Scott Gale with the FBI. And I was like, "Okay," he's on the phone, and she's standing there. I was like, "Close the door. Like, get out and close it." She's like... So get on the phone. He asked me if I'll come down. I said, "Yeah, absolutely. Let's schedule it for next Tuesday," and I put it off four or five days. Um, I go to my brother-in-law immediately who's, uh, who's a, uh, a lawyer, and he says, "Oh, yeah, yeah." And I don't really tell him exactly what's going on, but I tell him, "This is what's happening kind of, and I'm- I may be in trouble. I need a, uh, a... I need a federal defense attorney." I don't even know what a federal defense... I don't even know the difference, but he said, "You need a federal defense attorney at the FBI." So he, we go on a couple, we meet a couple lawyers. I end up getting a lawyer. I give him like 75 grand, um, and he started to have me convinced... Initially, he had me convinced I was probably gonna go to jail for a few years.

Lex Fridman 1:02:39 Mm-hmm.

Matthew Cox 1:02:39 But really, that's what they kinda do to justify you giving them $75,000.

Lex Fridman 1:02:45 Right.

Matthew Cox 1:02:46 And then... But the more I thought about it, the... You know, and, and read, he gave me the guidelines that, that supposedly I had, I had, um, you know, the, the fraud that I had committed and what the gui- and the guidelines that oversaw that. Um, and I read it, and I was like, "I'm not really in trouble here, because I'm looking at a felony, but I'm not gonna go to jail." Because there was no potential for the bank to lend- to lose money. So... Because I bought the house with like a hard money loan, and then I renovated it with my own cash, and when I sold it, it appraised at 250,000. My, my, uh, ex-wife borrowed like 180. So there's plenty of, of equity. If the whole thing had gone into foreclosure, they still would've got their money back. And to be honest, by the time all this happened, there was only like three of the- three properties. It was like five, but we'd already sold a few, and at this point, we'd just sold another two. There's like one or two properties left.

Lex Fridman 1:03:43 Mm-hmm.

Matthew Cox 1:03:43 So we're selling at that moment, we were selling them. So I was like, "No." I kinda argue with him, but then he wanted 75 grand. I gave him 75 grand, and then he comes back, and he says, "Good news. There was no potential fraud, so I can get you three years." Now, here's the thing. Here's, here's what I always kinda look back at. When I first got- went into his office, he said... He said, "Listen. You haven't been indicted yet. I spoke with the FBI. I spoke with the US attorney. They believe and they've been told..." And he said, "Look," he didn't... "They didn't tell me exactly what they have, but they said with the e- the evidence that they have on you, based on two confidential informants, that it- it's- you cannot go to trial." And I was like, "Right," which of course I knew that one, and I was like, "Okay." He said, "But..." He said, "You haven't been indicted yet, and they are fairly certain that you're running, um, a mill, right, a fraud mill over there, and that you guys are churning out fraudulent loans. Now, they can't come and they can't come and raid your office and do anything about it yet 'cause so far they only have you, but here's what I'm saying, is that," he said, "I can keep you from being indicted. It's called, um, pretrial, it's a pretrial intervention, where we go in, and what we'll do, what we'll do is you go, you work, you go in, talk to the FBI, you go grab a bunch of your mortgage broker's most egregious files. Grab them, bring those files to the FBI, go work with the FBI, they will indict them, and you will not be indicted." And I said, which I, I kick myself to this day, I said, "Absolutely not. I'm not gonna snitch on them. I'm not gonna cooperate. I'm not going to..." You know, I'd seen The Godfather. You're not supposed to cooperate. You're supposed to be loyal. Now, I'm not gonna do any of that, and it... You know, and so I say all of this where, you know, looking back, like I would've... If I could go back in time, I would've gone into our weekly meeting with a dolly, and I would've walked in front of everybody and scooped up two or three of the file cabinets and put them in the back of a truck and said, "Listen, you guys are gonna be talking to the FBI soon. I suggest you get attorneys," and I would've driven off. But I didn't. I thought, "No, be loyal. You know, don't do that," and, and what happened was when my... When the other thing falls apart, right, when the next scam falls apart, every one of these people go to the FBI. Like, they're not even coming to them. These guys are going to the FBI with lawyers. "I wanna cooperate. I wanna tell you what Cox did. I wanna help. I wanna..." And I'm thinking Like, I never had to get indicted to begin with.

Lex Fridman 1:06:41 So you think that most of these people, from your experience, are going to, uh, sacrifice all integrity (laughs) ... That's a funny word. Sacrifice...

Matthew Cox 1:06:50 It applies to this, but that's-

Lex Fridman 1:06:52 (laughs)

1:06:53 ... they're going to sacrifice friendships and loyalty for, just to save the- their own ass.

Matthew Cox 1:07:00 Yeah. I only had one person that did not talk to the FBI. I had one person that every time the FBI or the Secret Service went to that person's door, she said, "Don't come to my house again. I don't have anything to say about y- uh, about Matt. I have nothing to do with any of this. Talk to my lawyer." And this happened over and over again. And that's my ex-wife. She's a gangster.

Lex Fridman 1:07:24 So are there people in this world you trusted or you still trust?

Matthew Cox 1:07:30 I, you know, the- the problem is, eventually I cooperate. And at the time I didn't want to cooperate. I didn't believe in cooperation. But after seeing how many people cooperate and the way the system is set up, I think that my understanding of loyalty is vastly more realistic now. And I think that if you're committing crime, if- if you're ... L- absolutely, like the things I did, I did a bunch of scumbag things, you know? I mean, I'm not killing people, but I'm doing scumbag things. I'm lying, cheating, stealing. That, I'm a thief, you know? You boil down to it, that's what I am. So you can't go around behaving like a scumbag, dealing with scumbags, and then expect those same scumbags to suddenly abide by some kind of a street code and not roll over on you, you know? And it does happen, but it's- it's like in the, it's in the 90 percentile of people that cooperate, 90-something percent. And people cooperate when they're not even looking at any real time. So if you're looking at 30 years and- and especially after going to prison. You go to prison, and it's like, "This guy's a standup guy over here. He got 30 years. He could have cooperated against all of his co-defendants, but he didn't." Nobody comes to see him. His wife divorced him. You know, his kids ended up in foster care. His, you know, his- his friends are- are- are cleaning out his house. Nobody puts money on his- on his- his books. Nobody comes to see him. Nobody answers his phone, nothing. He took 30 years. Most of those guys turned around, they end up getting indicted for other things years later. They cooperate. And the best thing this guy's got going for him is that he can walk around and say, "Oh, he's a standup guy. That guy's going to the same halfway house as me. He's probably, he's gonna do 30 years where I'm gonna do 10."

Lex Fridman 1:09:39 A standup guy meaning he never snitched.

Matthew Cox 1:09:41 Right.

Lex Fridman 1:09:42 And so everybody's seeing this example and saying, "Well, I'm going to snitch then." But it- it sounds like what people are doing is they're, uh, signaling, virtue signaling. Like they are, they would never snitch and actually do secretly.

Matthew Cox 1:09:59 I mean, what is it? I- I remember I talked to one of the COs at the prison one time, and he said, uh, he said ... I said, "Shit." I said, "50% of the guys here snitched." He goes, "It's more than that." He said, "But listen," he goes, "100% of them are lying about it." He said, "So you'll ..." He goes, "There's nobody here that's gonna tell you they- they snitched. Nobody." So there's guys, tons of, tons of them that cooperate. If 80, 90% of- of, um, defendants cooperate, you know, you start doing the math, and you, if you- you ask 10 guys in prison, all of them say, "I didn't- I didn't cooperate. I didn't cooperate. I didn't cooperate." Like, okay, you ask 100. "I didn't cooperate." Like, nobody's gonna say, "I cooperated."

Lex Fridman 1:10:38 Does that break your heart a little bit, that people backstab each other like this?

Matthew Cox 1:10:44 It- it does. It does, but ... (sighs) You know, but I have such a low opinion of people. You know what I'm saying? Like, I don't expect ... It- it's not that I- I don't like people, it's that I just don't expect anything of them, you know? I don't expect you to look out for me, you know? There was a time when I did. I thought, "I look out for you, you should look out for me," but I just don't expect that anymore.

Lex Fridman 1:11:06 See, but I think humanity flourishes because there is a lot of people out there that do the thing that is difficult to do in terms of integrity.

Matthew Cox 1:11:17 That may be, but these- these aren't people with integrity. These are criminals. If these were decent human beings, and all of them will tell you, "Well, why'd you do that?" "Oh, you know, I was a drug addict," or, "I- I needed the money." Well, if you were a- if you were a decent human being, you would have cl- gotten off the drugs. You would have gone and gotten three jobs. You can work 80 hours a week. I've done it. You can work 84, 85, 80. You can work 90 hours a week. You can do that. "Oh, I did it for my kids." No, you're lazy. You could have worked three jobs for your kids. Instead, you decided to sell methamphetamine. "Well, I was, I was addicted." You could have gotten off meth. It wasn't important. It was the easy way out. You're not someone with integrity. So for you to sit there and say, "Hey, I'm gonna act like a scumbag, but now I got caught or you got caught and I don't want you to tell on me," well, you're a guy that robs banks. You stick guns in people's faces. You kidnap people. You torture people. You sell drugs. You're not, you're not a moral, ethical person, but you want, you want everybody else to hold up to some ethical code while- while you're robbing grandma. That's not right. Like, you know, so you know, I- I get, I get the whole Omerta code, you know, and there was a mo- there was a time when I was, you know, delusional en- enough to believe that. But, you know, after you go, after going through it, no. A- and after going through it multiple times, no.

Lex Fridman 1:12:46 I have to really think about that, and I re- deeply appreciate your honesty on this.

Matthew Cox 1:12:52 (laughs) So ... Right.

Lex Fridman 1:12:54 'Cause it's, I- I think, um ... I mean...There's all kinds of criminals in this world, and they all have all kinds of stories. And, uh, your story is one of, uh, I don't know if it came from desperation versus a love of this kind of game, right? Like, it, it wasn't part of it an attraction to the, the creative aspect of this? Of breaking the rules when nobody else can, and you figure out a way to do it?

Matthew Cox 1:13:37 I think, I think initially it was I needed the money.

Lex Fridman 1:13:42 Mm-hmm.

Matthew Cox 1:13:42 Like that's the first thing, you know? You, you say, "Oh, okay. Well, I need..." And if you ask most guys, "Oh, well man, I needed the money." You need the money. But, and then I, I, I definitely needed the money. But then you get $50,000 in your bank, and then you get 100, and then it's 200, and then it's half a million, and then it's a million. And what the hell are you still committing fraud for? You've got half a million or a million dollars in the bank, or worth of real estate, or you've, you're making $5,000, $10,000 a month just in rental income. Why are you still committing fraud? So it turned, I think it morphs into the creativity in, in part for me. And, and two, it was a chance for me to prove to everybody how smart I was. You know? I mean, it was done out of desperation initially, and then it just turned into pure narcissistic arrogance. "Look at me. Look at how I can do things that nobody else can do. Look how smart I am. I just walked into Bank of America, handed them seven documents that were all fraudulent and they cut me a check for $250,000." Like, "Wow, I'm amazing." You know? And guess what? They're never gonna get their check, and they, they won't know, even know where to start to try and find the person because they're looking for a phantom. So, you know, and you feel great. I felt great. I used to say, "I, I felt like, I felt like James Bond. I felt like 007." It was amazing. And, you know, and it, it did, it feeded my need to feel important, you know? Even if it, it, it was, even if that was a lie, 'cause all that success was just a lie.

Lex Fridman 1:15:29 Well, no. You were good at it.

Matthew Cox 1:15:31 I was good at it, but it was, it's not-

Lex Fridman 1:15:34 It was illegal.

Matthew Cox 1:15:35 ... it's not like I'm Elon Musk.

Lex Fridman 1:15:37 (laughs)

Matthew Cox 1:15:37 You know what I'm saying? Like there's, it's not like you're an exce- I'm an exceptional human be- I'm an exceptional human being at a horrific thing, at, at committing fraud. Like-

Lex Fridman 1:15:45 Well, the question is how many people are getting hurt? Because, uh-

Matthew Cox 1:15:49 Initially, the thing is initially, nobody got hurt. That's the thing. Nobody ever lost any money directly. Like I didn't go and say, "Give me $50,000," and I ran off with your money. Like I wasn't doing that, and that was a great justification. But at some point, and we'll get into that, you know, I take off on the run.

Lex Fridman 1:16:08 Mm-hmm.

Matthew Cox 1:16:09 And people do lose money. I, I didn't take that money directly. And for some reason, in my, you know, sick mind or whatever the case may be, that seems like a distinction to me that makes me feel okay. It's that I never said, "Give me 300, give me $10,000," and I ran off with it. But I put people in the position where I damaged the credit, or damaged the, the title to their house, and they had to go get a lawyer to fix that. You know? And, and so that, they had to go pay a lawyer $10,000. So I absolutely caused that person, that I stood... To me, to, "You're a victim and I owe you that money." And it was a shitty thing to do, because even at the time I was like, "Oh, they'll make a couple phone calls. It'll be fine." It wasn't fine. And if I had really put any thought into it at all, I would have known, it, it's gonna, it's gonna really affect these people. And those people had done nothing wrong with the exception of trusting me. They rented me their house, or they owner financed their house. They made the mistake of bumping into me, and now they owe 10,000, $20,000. You know? And, and I'm sure a, a ton of anguish.

Lex Fridman 1:17:28 So what happened when you were g- caught that first time?

Matthew Cox 1:17:32 So I, I was caught. I got three years probation, you know? I took the probation, which is-

Lex Fridman 1:17:39 What does that involve?

Matthew Cox 1:17:40 Initially it was, it was such a slap on the ha- on the wrist.

Lex Fridman 1:17:45 Were you allowed to still practice and be in the-

Matthew Cox 1:17:47 No. Well, okay, so I wasn't. I had to, I couldn't own the mortgage company anymore.

Lex Fridman 1:17:51 Mm-hmm.

Matthew Cox 1:17:51 That was a good question, 'cause like, I, you would think, you know, "Wouldn't it be great if I could keep on going?" Um, but what they said was, you know, "You, you have to forfeit your, your brokerage, um, your broker's license and your brokerage business license." And what I did was I, I transferred my brokerage business license to a guy that essentially bought my business. They allowed me to work as a consultant in the mortgage industry, you know? 'Cause they went, you know, they go, my, my lawyer goes to the judge and says, "What else can he do?" So, um, and so I have a, a friend, his name's Dave Walker. He was a CPA. He came in and he bought my business and he paid me like $9,000 a month, and that covered my bills. Uh, my wife and I got divorced, so she's my ex-wife. And I, I don't know what to do, right? Like I don't, I'm, I could've, you know, and I always say, you know, I could've like, you know, 'cause you look back and it's like, I could've claimed bankruptcy. Um, I could've moved into my parents' spare room, you know, something like that. But, you know, 'cause I had, I had...I lost everything in my divorce. Um, I had huge child support payment, um, you know, not that that has anything to do like with my, my ex-wife. Like, I absolutely signed up for that, like I wanted to pay that. Um, but it was, it was, it was a chunk of change, you know? So we're talking about