Federal court has closed the book on a long-running Houston loan scam, sentencing resident Bun Khath to 10 years in prison for laundering proceeds from a $40 million bank-loan fraud scheme. Khath pleaded guilty in 2025 and admitted running shell companies that helped move fraudulent loan money into accounts controlled by co-conspirators, in a scheme prosecutors say spanned several years and touched dozens of loan applications, according to the U.S. Attorney’s Office for the Southern District of Texas.
Sentence Announced
In a post on X on Feb. 20, the U.S. Attorney’s Office for the Southern District of Texas announced the sentence, saying Khath would serve 10 years in federal prison. The post marked a formal judgment in a case that prosecutors say was built on years of falsified loan applications and sham companies.
How the Scheme Worked
A February 2025 press release from the U.S. Attorney’s Office for the Southern District of Texas laid out how the scam operated. Prosecutors said Khath and his co-conspirators packed loan applications with fake invoices, tax returns and bank statements to obtain financing, then channeled the proceeds through a maze of shell companies and bank accounts. According to the office, Khath "acknowledged opening and maintaining shell companies and bank accounts to collect money from the scheme" and wiring funds to accounts that other conspirators controlled.
Co-Defendants and the Probe
Local reporting and court records show Khath was named in a July 2023 indictment alongside several other Houston-area brokers and business owners, and that one co-defendant, Hugo Villanueva, is still at large. Click2Houston reported that Khath pleaded guilty in early 2025 and was allowed to remain on bond while he waited for sentencing.
Federal Investigation
Authorities say the investigation involved multiple federal agencies, including the Federal Housing Finance Agency-OIG, IRS Criminal Investigation and the FBI, as investigators unraveled the broader network behind the fraudulent loans. The U.S. Attorney’s Office for the Southern District of Texas has continued to bring related cases, filing charges and accepting guilty pleas in the larger fraud probe.
What Happens Next
With Khath's sentence now in place, prosecutors say enforcement against loan-fraud networks in the region remains a priority, with additional court dates still pending. Anyone with information about Villanueva’s whereabouts is asked to contact the FBI at 713-693-5000, as reported by Click2Houston.
