Minnesota suspends thousands of borrowers over suspected fraud

Thousands of Minnesota borrowers have been suspended after allegations of widespread fraud.

The Small Business Administration (SBA) said on Thursday it had reviewed thousands of Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) loans in the state, resulting in 6,900 Minnesota borrowers being suspended with some to be referred to federal law enforcement.

It comes amid other widespread allegations of fraud in the state that have caused a political headache for its Democratic Governor Tim Walz.

Newsweek reached out to SBA and Walz by email to comment on this story outside of normal business hours

Why It Matters

Merrick Garland’s Department of Justice first uncovered welfare fraud in Minnesota in 2022, with the Feeding Our Future scam that is estimated to have cost taxpayers $250 million. So far, 57 defendants have been convicted, and 78 charged, according to The Associated Press (AP).

Since then, further instances of alleged fraud have emerged. Speaking 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 that nearly $400 million in potentially fraudulent loans were tied to borrowers in Minnesota. These potentially fraudulent loans included 7,900 PPP and EIDL loans approved during the COVID-19 pandemic.

SBA Administrator Kelly Loeffler said on X that the SBA would “also refer every case, where appropriate, to federal law enforcement for prosecution and repayment.”

Loeffler did not offer other information about the alleged fraud. It follows her sending Walz a letter last week saying that the SBA would pause $5.5 million in annual funding “pending further review.”

Allegations of potential fraud in the state are spiraling. On Friday, YouTuber Nick Shirley released a 42-minute video, that has now been viewed more than 130 million times, alleging that nearly a dozen taxpayer-funded day care centers in Minnesota are not actually providing any service amid broader concerns about alleged fraud in the state. The video attracted the attention of lawmakers and politicians.

Meanwhile, federal investigations into alleged fraud in the state continue. FBI Director Kash Patel said on Sunday that the agency had deployed personnel and resources to Minnesota “to dismantle large-scale fraud schemes exploiting federal programs.”

Attorney General Pam Bondi said on Monday that there were “more prosecutions coming.”

Calvin Jillson, a politics professor at Southern Methodist University in Texas, told Newsweek fraud in the state was being “exploited politically by the Trump administration.”

What People Are Saying

Calvin Jillson, a politics professor at Southern Methodist University, told Newsweek: “It appears that fraud has been rampant for years in Minnesota public service programs, including post-covid SBA business loan, 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.”

SBA Administrator Kelly 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 party in Florida that he will “get to the bottom” of alleged fraud in Minnesota.