In a news conference on Thursday, Burlington County Prosecutor Scott Coffina said the tale was "fictitious" and "formed the basis of a scam."
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Coffina said it was, "concocted to compel kind-hearted individuals to contribute to the cause."
"The entire campaign was predicated on a lie," said Coffina. The couple and the homeless man are all under arrest.
The story told by the suspects, 28-year-old Kate McClure, her 39-year-old boyfriend Mark D'Amico, and 39-year-old Johnny Bobbitt Jr., was that McClure ran out of gas on Interstate 95 in November 2017 and Bobbitt helped her by using his last $20 to buy her gas.
But, investigators say, the story was a complete fabrication.
TIMELINE: Key events in the GoFundMe hoax investigation
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It all allegedly began in October 2017 when McClure and D'Amico discussed "the homeless guy" by the SugarHouse Casino, which the couple frequented.
They went on to discuss how they wanted to help him by providing him with food, clothes, a Nintendo Switch, the possibility of a job and even a house, according to the criminal complaint.
On November 10, 2017, the tale about the encounter on I-95 was posted on the GoFundMe page. Claiming they wanted to "pay it forward," McClure and D'Amico set a goal of raising $10,000 to help Bobbitt get back on his feet.
They went on a media blitz to promote the campaign, and it ultimately raised about $400,000.
VIDEO: Fundraising surges for homeless hero
However, Coffina said, investigators learned McClure texted a friend less than an hour after the campaign went live saying the story was "completely made up." She did not run out of gas, Coffina said, and Bobbitt did not spend $20 to help her.
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She allegedly wrote, "The gas part is completely made up, but the guy isn't. I had to make something up to make people feel bad. So shush about the made up stuff."
The net proceeds were $360,000 after fees, which went into an account controlled by McClure. Bobbitt received $75,000, said Coffina.
News conference on arrests in GoFundMe case
However, Coffina said, Bobbitt - a Marine Corp veteran - wanted his fair share and sued the couple back in August, but by then the money was long gone.
In fact, Coffina said, the vast majority of the money was "squandered" by mid-March. McClure and D'Amico bought a car, took trips, bought high-end handbags and hit the casinos.
That lawsuit sparked the investigation which eventually uncovered the entire scheme, according to the prosecutor.
Investigators searched the Florence, New Jersey home of D'Amico and McClure in September after questions arose about what happened to the money they raised for Bobbitt.
Judge orders NJ couple return money from GoFundMe account to homeless man
Investigators reviewed text messages between the couple, and Coffina said there were thousands of messages about their financial woes, inability to pay bills, and mounting debts.
During one exchange in March, Coffina said McClure "lamented that the pair had less than $10,000 remaining from the donors to GoFundMe."
However, D'Amico allegedly told McClure that the money from a pending book deal would "dwarf" the money generated by the GoFundMe campaign.
Even when the legal action began a few months later, D'Amico allegedly planned to include the developments in the book, which he intended to call "No Good Deed."
Police search home of GoFundMe couple in New Jersey
Also during the news conference, Coffina said Bobbitt was not taken advantage of, but was fully complicit in the scheme.
All three have been charged with Theft by Deception (second-degree,) and Conspiracy to Commit Theft by Deception (second-degree).
D'Amico and McClure, both of Florence Township, New Jersey, surrendered on Wednesday night. They were processed and released.
Bobbitt, of the Kensington section of Philadelphia, was charged on Wednesday and is awaiting extradition.
All three suspects face 5-10 years behind bars.
Coffina said GoFundMe has cooperated with the investigation, and will be refunding all of the money to 14,347 donors.