Thousands of Minnesota borrowers have been suspended following allegations of widespread fraud tied to pandemic-era relief programs.
The Small Business Administration (SBA) said Thursday that it reviewed thousands of Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) cases in the state, resulting in the suspension of 6,900 borrowers. Some cases are expected to be referred to federal law enforcement.
The move comes as Minnesota faces a series of high-profile fraud allegations that have created political pressure for Democratic Governor Tim Walz. Newsweek reached out to both the SBA and Walz’s office by email for comment outside of normal business hours.
Why It Matters
Federal authorities first uncovered major welfare fraud in Minnesota in 2022 with the Feeding Our Future case, which investigators estimate cost taxpayers $250 million. According to The Associated Press, 57 defendants have been convicted so far, with 78 charged.
Since then, additional allegations have emerged. In mid-December, First Assistant U.S. Attorney Joe Thompson said that $9 billion or more in federal funds allocated to 14 state-run programs since 2018 may have been stolen.
What to Know
The SBA said nearly $400 million in potentially fraudulent loans were connected to Minnesota borrowers. Those cases include 7,900 PPP and EIDL loans approved during the COVID-19 pandemic.
SBA Administrator Kelly Loeffler said on X that the agency would “also refer every case, where appropriate, to federal law enforcement for prosecution and repayment.” She did not provide further details on the specific allegations.
The announcement follows a letter Loeffler sent to Walz last week stating that the SBA would pause $5.5 million in annual funding to the state pending further review.
Scrutiny of alleged fraud in Minnesota has continued to intensify. On Friday, YouTuber Nick Shirley released a 42-minute video—now viewed more than 130 million times—claiming that nearly a dozen taxpayer-funded daycare centers in the state are not providing services. The video drew attention from lawmakers and political figures.
Federal investigations are ongoing. FBI Director Kash Patel said Sunday that the agency has deployed personnel and resources to Minnesota “to dismantle large-scale fraud schemes exploiting federal programs.” Attorney General Pam Bondi added Monday that there are “more prosecutions coming.”
Calvin Jillson, a politics professor at Southern Methodist University in Texas, said the issue is being used as a political tool.
What People Are Saying
Calvin Jillson told Newsweek:
“It appears that fraud has been rampant for years in Minnesota public service programs, including post-covid SBA business loans, child care and other social service programs. Some of these programs, such as the SBA loans, were federally funded and administered, while others like the child care programs were joint federal-state ventures. Investigations, prosecutions and convictions for the guilty clearly are warranted, but it appears that the federal crackdown in Minnesota, soon to be expanded to other states, is being exploited politically by the Trump administration. Hopefully, the focus can remain on cleaning up these programs and recovering lost public monies rather than suggesting that they are representative of broader blue-state corruption.”
Loeffler wrote on X:
“Over the last week, SBA has reviewed thousands of potentially fraudulent pandemic-era PPP and EIDL loans approved in Minnesota. Today, our agency took action to suspend 6,900 Minnesota borrowers amid suspected fraudulent activity. In total, these borrowers were approved for 7,900 PPP and EIDL loans worth approximately $400M. These individuals will be banned from all SBA loan programs, including disaster loans, going forward. We will also refer every case, where appropriate, to federal law enforcement for prosecution and repayment. After years, the American people will finally begin to see the criminals who stole from law-abiding taxpayers held accountable—and this is just the first state.”
Governor Tim Walz’s office said in a previous statement to Newsweek:
“The Governor has worked for years to crack down on fraud and asked the state legislature for more authority to take aggressive action. He has strengthened oversight—including launching investigations into these specific facilities, one of which was already closed. He has hired an outside firm to audit payments to high-risk programs, shut down the Housing Stabilization Services program entirely, announced a new statewide program integrity director, and supported criminal prosecutions.”
What Happens Next
President Donald Trump said at a New Year’s Eve event in Florida that he will “get to the bottom” of the alleged fraud in Minnesota, signaling that additional federal action could follow.
