Risk & Compliance

Feds Net 57 People in Probe of PPP Loan Scams

The defendants allegedly tried to steal a total of $175 million from the program, which some had feared would be a magnet for fraud.
Matthew HellerSeptember 11, 2020
Feds Net 57 People in Probe of PPP Loan Scams

The Department of Justice said it had uncovered widespread fraud in the Paycheck Protection Program, with 57 people, including an NFL player, being charged so far with trying to steal a total of $175 million in coronavirus relief loans for small businesses.

The spectrum of fraud has ranged from individuals allegedly receiving money on behalf of fake companies to legitimate business owners accused of spending funds on luxury items for themselves rather than paying employees and even suburban homeowners allegedly pretending to be farmers.

Jerome Bellamy, who was released earlier this week by the New York Jets, has been charged with fraudulently obtaining a $1.2 million loan from the PPP for his Drip Entertainment company and spending the proceeds on luxury goods and at a casino in Hollywood, Fla.

“The PPP program represented critical help at a critical time,” Acting Assistant Attorney General Brian C. Rabbitt said. “Unfortunately, the crisis brings out not only those that try to help others, but those who try to take advantage of the crisis for personal gain.”

When applications for the program closed last month, 5.2 million loans had been made totaling more than $525 billion. It was open to any business with fewer than 500 employees per location, with the government forgiving the principal and interest on loans as long as 60% of the money went toward maintaining payroll.

As the Washington Post reports, the PPP had been a “fraud concern since its launch in early April. Funds were disbursed with relatively little vetting, and businesses were allowed to certify their own eligibility.”

According to prosecutors, the program has attracted large groups of individuals who coordinated to defraud the program on a massive scale across numerous loan applications. Bellamy allegedly conspired with 10 other defendants who collectively filed at least 90 fraudulent loan applications seeking more than $24 million in loans.

Officials said the total amount of fraud is unclear at this point, and more charges are expected over the coming months and years.