SBA Suspends Nearly 7,000 Minnesota Borrowers Amid $400 Million Pandemic Loan Fraud Investigation
MINNEAPOLIS, Minn. — The Small Business Administration (SBA) has suspended nearly 7,000 borrowers in Minnesota following an extensive investigation that uncovered a suspected $400 million fraud scheme involving Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) funds issued during the COVID-19 pandemic. SBA Administrator Kelly Loeffler announced the sweeping action on January 1, 2026, highlighting the agency’s commitment to holding those responsible accountable and preventing further misuse of federal relief resources.
According to Loeffler, the SBA’s review identified approximately 6,900 borrowers connected to potentially fraudulent loans approved in Minnesota. These loans, totaling nearly $400 million, were part of the pandemic-era programs designed to support small businesses and individuals affected by the economic fallout of COVID-19. The agency’s findings included 7,900 PPP and EIDL loans flagged for suspicious activity, some of which had already been forgiven under prior administrations.
“These individuals will be banned from all SBA loan programs, including disaster loans, going forward,” Loeffler stated in a message posted on X. She further indicated that cases deemed appropriate would be referred to federal law enforcement for prosecution and recovery of funds. This move marks a significant escalation in the federal government’s efforts to combat fraud related to pandemic relief efforts.
The SBA’s action comes amid heightened scrutiny of Minnesota’s handling of federal aid, with Governor Tim Walz and his administration facing criticism over alleged fraud in social services programs. Loeffler’s letter to Governor Walz, dated December 23, 2025, informed him that the SBA would halt disbursement of more than $5.5 million in annual federal support to SBA resource partners operating in the state until further notice.
Among the flagged loans, at least $2.5 million were connected to a Somali fraud scheme centered in Minneapolis, underscoring the complex and localized nature of the fraud network. Loeffler’s letter also revealed that $430 million in PPP funds tied to roughly 13,000 loans were identified as potentially fraudulent but were nonetheless funded, raising concerns about oversight during the pandemic response.
Federal authorities are now intensifying investigations into these cases. The Department of Justice has been involved in pursuing criminal charges in similar pandemic fraud cases nationwide, and the SBA’s referral of cases is expected to bolster these efforts. Meanwhile, the Federal Bureau of Investigation continues to investigate white-collar crime related to COVID-19 relief programs.
The SBA’s crackdown aligns with broader federal initiatives aimed at safeguarding taxpayer funds and ensuring the integrity of pandemic relief efforts. The agency’s Office of Inspector General has previously reported on vulnerabilities in the PPP and EIDL programs, prompting calls for enhanced fraud detection and prevention measures.
Governor Walz’s office has yet to issue a detailed response to the SBA’s suspension announcement. However, the developments add to mounting pressure on state officials to address fraud allegations and improve oversight of federally funded programs.
The SBA’s decisive action in Minnesota signals a turning point in pandemic loan fraud enforcement. As Loeffler remarked, “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.”
For more information on SBA loan programs and fraud prevention, visit the Small Business Administration official site. Updates on federal fraud investigations can be found through the Department of Justice Criminal Fraud Section and the FBI’s White Collar Crime Division.
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