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What is PPP Loan Fraud?
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PPP loan fraud is filling out a form. That’s all it takes. You didn’t rob a bank. You didn’t threaten anyone. You sat at your kitchen table, answered some questions online, and clicked submit. And now you could be facing 30 years in federal prison. The Paycheck Protection Program was designed to be fast and easy – minimal verification, self-certification, money in your account within days. That speed and ease is exactly what makes prosecution so straightforward. Every false statement you made on that application is documented. Every certification you signed is evidence. The government didn’t verify your claims in 2020. They’re verifying them now.
Welcome to Spodek Law Group. Our goal is to explain exactly what PPP loan fraud means, who’s being prosecuted, and what the real consequences look like. The pandemic relief programs ended years ago. The prosecutions are just getting started. Understanding where you stand is the first step toward protecting yourself.
Here’s the uncomfortable truth that most people don’t understand: the statute of limitations for PPP fraud was extended from 5 years to 10 years. Congress did this specifically because they knew the investigation pipeline would take years to work through. If you received a PPP loan in 2020, the government has until 2030 to prosecute you. If your forgiveness was granted in 2021, they have until 2031. The clock hasn’t expired. In many cases, it’s barely started.
The Federal Charges Stacked Against You
PPP fraud isn’t charged under a single statute. The CARES Act that created the Paycheck Protection Program doesn’t contain any penalty provisions. Instead, PPP fraud gets prosecuted under a stack of existing federal laws – and each one carries its own maximum sentence.
Bank Fraud (18 U.S.C. § 1344): If your PPP loan came from a traditional bank, you face bank fraud charges. Maximum penalty: 30 years in federal prison and a $1,000,000 fine. Per count.
Wire Fraud (18 U.S.C. § 1343): If you submitted your application online – which almost everyone did – you committed wire fraud. Maximum penalty: 20 years per count.
False Statements to Financial Institution (18 U.S.C. § 1014): Every false certification on your application – inflated payroll, fake employee count, claiming the business existed when it didn’t – is a separate violation. Maximum penalty: 30 years per count.
Conspiracy (18 U.S.C. § 371): If anyone helped you prepare the application, or if you helped others with theirs, conspiracy charges apply. Maximum penalty: 5 years per count.
Money Laundering (18 U.S.C. § 1956): If you used the fraudulent proceeds to purchase property, invest, or conduct transactions designed to hide the origins of the funds, money laundering charges apply. Maximum penalty: 20 years per count. This is how defendants like Meelad Dezfooli ended up with 15+ year sentences – the money laundering charges stacked on top of the fraud charges.
Tax Fraud: If you didnt report PPP funds as income, or if you claimed fraudulent deductions related to PPP spending, the IRS gets involved. Tax fraud adds years to your exposure and brings IRS Criminal Investigation into the case alongside the FBI and SBA-OIG.
Heres were the math gets terrifying. A single PPP application can trigger four or five federal statutes. Each statute allows for seperate counts. Each false statement, each wire transmission, each fraudulent certification – prosecutors can charge them all individually. The theoretical maximum exposure for someone who submitted a single fraudulent PPP application can exceed 100 years.
Prosecutors dont typically seek those maximums. But they use the threat of maximums to create leverage. When your looking at decades of potential prison time, the pressure to plead guilty to something – anything – becomes overwhelming. Thats exactly how the system is designed to work.
Todd Spodek tells clients that understanding your actual exposure – not the theoretical worst case – is essential for making informed decisions. At Spodek Law Group, we’ve seen how federal prosecutors use charge stacking to manufacture pressure. The first step in any defense is understanding what your actually facing.
How the Government Catches PPP Fraud
Most people who committed PPP fraud assume there safe becuase the application was approved. They beleive the government didnt verify anything in 2020, so why would they start now? This thinking is dangerously wrong.
The SBA uses a four-step fraud detection process: screening, data analytics, human-led reviews, and OIG referrals. Your application isnt sitting in a filing cabinet somewhere. Its being actively analyzed using machine learning algorithms designed to identify fraud patterns across millions of applications.
Heres what those algorithms look for. Multiple applications from the same IP address. Identical document formats across diffrent businesses. Employee counts that dont match IRS payroll records. Bank statements with suspicious formatting. Businesses that didnt exist before the pandemic. Application timelines that cluster in ways suggesting coordinated fraud. The machines catch patterns humans would never notice.
The Do Not Pay database is even more comprehensive. Your PPP application was screened against Treasury records, IRS filings, state tax databases, prior loan defaults, and federal debarment lists. Lies that worked in 2020 are being caught now becuase the cross-referencing is ongoing.
Theres another hidden connection most people dont realize. Your bank was required to keep all PPP records for 10 years. Every document you submitted still exists. Every email, every certification, every signed form. When federal investigators come asking questions, your bank has no privilege to protect you. They will cooperate. They will hand over everything.
The SBA-OIG has screened over 5 million PPP loans totaling $525 billion using these methods. They identified over $200 billion in potentially fraudulent disbursements. Thats 17% of all PPP funds. The government has millions of targets to choose from. The question isnt wheather they can find fraud. The question is wheather your name is on the list they work through next.
Theres another investigation trigger that most people dont think about: whistleblowers. Fiscal Year 2024 saw the highest number of qui tam actions filed in history. Employees, business partners, family members – anyone who knows about fraud can file a complaint and collect 15-30% of whatever the government recovers. Your business partner might be talking to the government right now. Your accountant might decide their cut of the recovery is worth more then their relationship with you. The False Claims Act incentivizes everyone around you to report fraud.
The COVID-19 Fraud Enforcement Task Force has been operational since May 2021. Since then, its charged over 3,500 defendants, recovered over $1.4 billion, and filed over 400 civil suits. This isnt a token enforcement effort. Its a massive, coordinated, multi-agency operation thats still running at full capacity.
Real People Who Went to Prison
These arent hypothetical prosecutions. Real people are serving real sentences for PPP fraud.
Meelad Dezfooli of Nevada obtained over $11 million in fraudulent PPP loans. After recieving the funds, he laundered the money by purchasing approximately 25 properties in Nevada, often using the alias “James Dez.” He also funded his personal investment account, bought luxury cars, and gambled extensivly throughout Las Vegas. He was sentenced to over 15 years in federal prison.
Carl Delano Torjagbo of Georgia was convicted of obtaining a fraudulent $9.6 million PPP loan and filing fraudulent tax returns that generated a $3.4 million IRS refund. Between PPP fraud, tax fraud, and money laundering charges, he faces a maximum of 170 years imprisonment. Think about that number. 170 years for paperwork crimes.
Michael and Tiffany Fullerton of Texas used one existing and three dormant business names to submit six fraudulent PPP applications totaling over $3.5 million. Heres the irony: they used the funds to attempt starting a marijuana grow and dispensary – a business thats still federally illegal. They committed federal fraud to fund federal crimes. They also bought luxury watches, a boat, and invested in a bar and grill. Michael recieved 152 months. Tiffany recieved 108 months. Combined: 32 years of there lives.
Renetta Golden-Larimore of Kansas City prepared approximately 43 false PPP applications that were funded. Total loss to the SBA: $908,278. She was sentenced to 51 months – over four years. Twenty-one other people were charged and convicted in the same scheme.
Heres what should concern you about these cases. The government isnt just prosecuting the masterminds. There prosecuting everyone involved. The preparers. The applicants. The people who recieved funds. If you were part of a fraud scheme – even on the periphery – your exposure is real.
Theres another pattern in these cases worth understanding. The government often prosecutes entire networks. When they catch one person, they work up the chain and down. The Atlanta fraud ring resulted in 12 defendants – all convicted. The Kansas City scheme resulted in 22 defendants. The Middle District of Florida alone has charged over 100 defendants in pandemic fraud cases. If you were connected to anyone whos been charged, investigators already know about you.
The first PPP fraud charges were filed within 60 days of the first loan disbursements. The government was ready for fraud from day one. They set up monitoring systems, established the Task Force, and started building cases immeditaly. The idea that they were overwhelmed and will eventually stop caring is fantasy. They were never overwhelmed. They were always watching.
The 10-Year Clock Is Ticking
Everyone thinks the statute of limitations protects them. Most federal crimes have a five-year window. PPP fraud used to work the same way. But in August 2022, Congress passed two bills – the PPP and Bank Fraud Enforcement Harmonization Act and the COVID-19 EIDL Fraud Statute of Limitations Act – that extended the limitation period to 10 years.
Heres the thing most people dont understand about when that clock starts. It dosent start when you submitted the application. It starts from whichever is later: the date you recieved the loan, the date you used the funds, or the date your forgiveness was granted.
Think about what that means practicaly. If you recieved multiple PPP loans with the second forgiveness application submitted in September 2021, your statute expires September 2031 at the earliest. If you submitted any additional documentation after that, it could be even later. Most people who committed PPP fraud in 2020-2021 are looking at prosecution windows extending into 2030 or 2031.
Heres another inversion that catches people off guard. Small frauds are being prosecuted just as aggressivly as large ones. There are reports of raids and arrests for PPP fraud amounts of $10,000, $15,000, and $20,000. The government isnt ignoring small cases – there making examples of them. The message is clear: no fraud is to small to prosecute.
The forgiveness process actualy makes things worse. When you applied for loan forgiveness, you signed another set of certifications. You made additional representations about how the funds were used. Each false statement in the forgiveness application is a seperate federal crime. And getting forgiveness dosent protect you – it just restarts the clock on when prosecutors can bring charges.
Why Paying It Back Makes Things Worse
Heres a paradox that destroys people. You might think that voluntarily repaying the loan is the right thing to do. It shows good faith. It makes the government whole. It demonstrates that you recognize the mistake. This thinking is wrong – and its been used against defendants in court.
Federal prosecutors discovered that businesses who voluntarily repay PPP loans essentialy confess to fraud. Unlike other situations were cooperation helps, PPP repayment creates what prosecutors call “consciousness of guilt” evidence. The argument is simple: why would you repay a legitimate loan? The only reason to voluntarily return money is becuase you knew it was fraudulently obtained.
This creates an impossible trap. Keep the money, and your facing fraud charges if investigators catch you. Return the money, and your handing prosecutors evidence that you knew the fraud was fraud. Neither option is good. Thats the reality of these cases.
Before making any decisions about repayment, disclosure, or cooperation, you need legal counsel who understands how prosecutors think. Todd Spodek has seen cases were voluntary repayment destroyed defenses that might otherwise have succeeded. At Spodek Law Group, we help clients understand the full consequences of every option before they act.
The Conviction Rate That Should Terrify You
IRS Criminal Investigation has obtained a 98.5% conviction rate in prosecuted COVID fraud cases. Read that number again. 98.5%. If your charged with PPP fraud, the statistical reality is that your going to prison.
Federal prosecutors dont bring weak cases. They build investigations for months or years before filing charges. By the time you recieve a target letter or indictment, theyve already gathered enough evidence to convict. The discovery process will reveal how much they know – and its almost always more then defendants expect.
Heres another uncomfortable truth. Sentences in 2024-2025 are running 40% longer then sentences in 2021-2022 for identical conduct. Early pandemic cases sometimes recieved lenient treatment becuase judges understood the chaos of the moment. That leniency is gone. Judges are now treating PPP fraud as straight financial crime with no pandemic excuse.
The average sentence for PPP fraud is 34-37 months. Thats nearly three years in federal prison. And thats the average – plenty of defendants recieve much longer terms, especialy those who committed multiple frauds or showed no remorse.
Heres what makes federal prison time diffrent from state time. Federal sentences are served at about 85% – you cant parole out early. If you get 36 months, your serving at least 30. And federal facilities are often far from home. Your serving your time hundreds or thousands of miles from your family, with minimal contact, for years.
The consequences extend beyond prison. A federal felony conviction means you lose the right to vote in many states, you cant own firearms, you face massive barriers to employment, and professional licenses are often revoked. Doctors, lawyers, accountants, real estate agents – careers that took decades to build can be destroyed in a single sentencing hearing. The prison time is just the beginning of the punishment.
What To Do If You Committed PPP Fraud
If you submitted fraudulent PPP applications, heres what you need to understand about your situation.
Dont assume your safe. The 10-year statute of limitations means prosecutions can continue through 2030-2031. The investigation pipeline is still processing cases. The fact that nothing has happened yet dosent mean nothing will happen.
Dont destroy evidence. If investigators eventualy contact you and discover you deleted records, shredded documents, or lied about what happened, obstruction charges will be added to your exposure. Obstruction can carry penalties as severe as the underlying fraud.
Dont voluntarily repay without legal counsel. As explained above, repayment creates consciousness of guilt evidence that prosecutors will use against you. The decision about wheather to repay – and how to structure it if you do – requires careful legal analysis.
Dont talk to investigators without an attorney. If federal agents contact you, you have the right to remain silent and the right to counsel. Exercising those rights is not an admission of guilt. Talking to investigators without representation almost never helps your situation.
Understand that the COVID-19 Fraud Enforcement Task Force is massive. It coordinates the Department of Justice, FBI, IRS Criminal Investigation, SBA Office of Inspector General, Secret Service, and multiple other agencies. This isnt a skeleton crew operation. Its a multi-billion dollar enforcement effort with dedicated prosecutors and investigators who do nothing but pandemic fraud cases.
Consider whether you need representation now, not later. The worst time to hire a lawyer is after you’ve been indicted. By that point, the government has built their case, collected their evidence, and decided to prosecute. The best time is before any investigation materializes – while options like proactive disclosure, cooperation, and strategic positioning are still available.
Spodek Law Group has handled federal fraud cases at every stage – from investigation through trial and appeal. Todd Spodek understands that these cases feel overwhelming. The potential penalties are severe. The government’s resources are vast. But early legal intervention creates options that dont exist later.
Call Spodek Law Group at 212-300-5196 for a confidential consultation. We can help you understand your actual exposure, evaluate your options, and develop a strategy.
Heres the final reality about PPP fraud. The government is still prosecuting these cases. The statute of limitations dosent expire for years. The conviction rate is 98.5%. Sentences are getting longer, not shorter. The question isnt wheather PPP fraud will be punished. The question is wheather you address your exposure now – while options still exist – or later, when investigators are already at your door.
We put this information on our website becuase people deserve to understand the system there operating in. Knowledge is protection. If you have concerns about PPP loans you recieved, call Spodek Law Group today. The consultation is confidential. Waiting is not.