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SBA Suspends Over 111,000 California Borrowers in Massive Pandemic Loan Fraud Crackdown
The federal Small Business Administration has suspended more than 111,000 California borrowers after uncovering $8.6 billion in suspected fraudulent activity linked to COVID-era relief programs, SBA Administrator Kelly Loeffler announced Friday.
“We have suspended nearly 112,000 borrowers tied to at least $9 billion in suspected fraud,” Loeffler said in a statement. “This staggering number represents the most significant crack-down on those who defrauded pandemic programs, and it illuminates the scale of corruption that the Biden Administration tolerated for years.”
According to the SBA, the agency suspended 111,620 California borrowers who received 118,489 loans through two major pandemic relief initiatives: the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). The suspended loans total $8.6 billion in potentially fraudulent funds.
PPP loans were designed to help small businesses maintain their workforce during the pandemic by providing forgivable loans for payroll costs. Meanwhile, EIDL loans are part of a broader SBA program offering low-interest disaster relief to businesses during emergencies, including the COVID-19 pandemic.
The announcement comes amid increasing scrutiny of pandemic relief program fraud nationwide. The California crackdown follows a similar action in Minnesota, where the SBA recently suspended 6,900 borrowers associated with 7,900 potentially fraudulent PPP and EIDL loans totaling approximately $400 million.
“As we did in Minnesota, we are actively working with federal law enforcement to identify the criminals who defrauded American taxpayers, hold them to account, and recoup the stolen funds,” Loeffler added.
The SBA’s announcement, however, has sparked political controversy. Just one day before the SBA’s declaration, California Attorney General Rob Bonta dismissed what he characterized as Trump administration claims of widespread fraud in the state.
“Trump claims California is wasting money when, in reality, our programs are helping lower-income individuals and lower-income families get healthcare, food and housing assistance,” Bonta said Thursday. “Trump claims, wrongly, California is perpetuating fraud when we are the victim.”
Bonta’s office noted that California has recovered nearly $2.7 billion from various fraud schemes over the past decade “including by partnering with the federal government.”
Governor Gavin Newsom’s office also pushed back against the SBA’s allegations. The Governor’s Press Office posted on social media: “OMG. The Trump Administration found MAJOR FRAUD in programs THEY control. The state has no role running/administering these programs. Were they hiding this??? California doesn’t hide fraud… we fight it. Nearly 1,000 arrests + over $125 billion STOPPED under @CAGovernor Gavin Newsom.”
The political sparring reflects the broader tensions surrounding pandemic relief program oversight. Minnesota became a focal point for welfare and social services fraud investigations in late 2025 when authorities uncovered extensive fraud schemes that could potentially exceed $9 billion.
Fraud in pandemic relief programs has been a growing concern nationwide as federal agencies continue to uncover schemes that took advantage of hastily deployed emergency programs. The rapid disbursement of funds during the pandemic, while necessary to support struggling businesses, created vulnerabilities that fraudsters exploited.
The SBA’s investigation is part of a larger effort to identify fraudulent activities and recover misappropriated funds. “As we continue our state-by-state work, our message is clear: pandemic-era fraudsters will not get a pass under this Administration,” Loeffler emphasized.
Financial experts note that the full scope of pandemic relief fraud may take years to uncover completely, as federal agencies continue reviewing millions of loans issued during the health emergency.
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16 Comments
The scale of suspected fraud in California’s small business relief programs is deeply concerning. Taxpayer funds intended to support struggling entrepreneurs should not be siphoned off by bad actors. I hope the investigations uncover the full extent of the abuse and lead to appropriate consequences.
Absolutely. Maintaining public trust in government programs is critical, especially when they’re designed to provide a lifeline during difficult times. Rigorous reforms are needed to protect the integrity of these vital initiatives.
This is a disappointing development, but not entirely surprising given the enormous scale and rapid rollout of the pandemic relief programs. While fraud is never acceptable, the circumstances posed significant challenges. I hope the investigations lead to meaningful reforms to strengthen controls and oversight.
Valid point. The speed and scale of the response likely increased vulnerabilities. Implementing more robust verification and monitoring processes should be a top priority to prevent future abuse.
This news highlights the importance of strong oversight and accountability when administering large-scale government aid programs, especially in times of crisis. While the scale of suspected fraud is alarming, I hope the investigations lead to meaningful reforms to better protect taxpayer funds in the future.
Agreed. Reforms to enhance transparency and reduce vulnerabilities to fraud should be a priority, so these vital relief programs can effectively support small businesses without being abused.
This news is extremely disappointing, but not entirely surprising given the challenges of rapidly deploying large-scale pandemic relief programs. While fraud is never acceptable, the circumstances posed significant hurdles. I hope the investigations lead to meaningful reforms to strengthen controls and oversight, so these vital initiatives can better serve their purpose.
Well said. The scale and speed of the pandemic response created vulnerabilities, but that doesn’t excuse fraud. Implementing robust verification processes and ongoing monitoring should be top priorities to protect the integrity of these programs moving forward.
This is a concerning report about the scale of fraud within pandemic relief programs in California. It’s crucial that taxpayer funds are used as intended to support small businesses struggling during difficult times, not lining the pockets of bad actors. Rigorous oversight and accountability are essential.
I agree, the level of suspected fraud is staggering. Proper safeguards and due diligence need to be in place to protect the integrity of these vital relief initiatives.
While the revelation of such extensive fraud is troubling, I’m encouraged to see the authorities taking decisive action to investigate and suspend the suspected fraudulent activity. Protecting the integrity of small business relief programs should be a top priority, as they play a crucial role in supporting the local economy.
I agree. Proactive steps to identify and address fraud are essential to ensuring these relief funds reach the intended recipients and have the maximum positive impact. Ongoing vigilance and continuous improvement of program controls will be key.
As someone who has worked with small businesses, I’m deeply troubled by the revelation of such widespread fraud in pandemic relief efforts. These programs were meant to be a lifeline, not an opportunity for exploitation. I hope the authorities hold all responsible parties fully accountable.
Me too. Protecting the integrity of these programs is crucial for supporting the small business community, which is the backbone of the economy. Robust anti-fraud measures are clearly needed.
While fraud in government programs is never acceptable, it’s important to understand the full context here. The pandemic created an extremely challenging environment for small businesses, and the rapid rollout of relief programs likely increased vulnerability to abuse. Careful analysis is needed to address the root causes.
That’s a fair point. The speed of the pandemic response may have contributed to these issues. Ongoing monitoring and continuous improvement of program controls will be critical going forward.