Do They Investigate Small PPP Loans

Do They Investigate Small PPP Loans? The Answer Is Worse Than You Think

You’re searching for this because you hope the answer is no. You took a PPP loan for $20,000 or $30,000 or $50,000, and you’re hoping that amount is beneath federal attention. You’re hoping prosecutors are too busy chasing the multi-million dollar schemes to bother with your small loan. That assumption is exactly backwards. Small PPP loans aren’t harder to prosecute. They’re easier. The evidence is simpler, the fraud patterns are more obvious, and the cases take less time to build. The government started with the headlines. They’re working their way down to you.

Welcome to the Spodek Law Group resource on what small loan investigations actually look like. Our goal is to help you understand something the dollar amount obscures: there is no minimum threshold for federal prosecution. Kelton McClarrin received $21,000 in PPP funds and is now serving 18 months in federal prison. Kevin Wright applied for $20,595 through a fake business and faces felony charges. Katherine Liggins and Eric Scott each took around $20,000 and were indicted by a federal grand jury. These aren’t outliers. They’re examples of what happens when the government reaches your position in line.

That’s the reality behind small PPP loan investigations. At Spodek Law Group, Todd Spodek and our federal defense team have watched the prosecution queue move from million-dollar cases toward smaller amounts. The pattern is clear: big cases first for the headlines, smaller cases next as the machinery gets more efficient. Your loan amount isn’t protection. It’s just timing. And the clock runs until 2030.

The $21,000 Case That Proves Everything Wrong

Heres a case that should terrify everyone whos hoping there small loan is beneath notice. Kelton McClarrin received nearly $21,000 from the Paycheck Protection Program. He used the money for personal expenditures including jail commissary services, CashApp, Grubhub, DoorDash, Facebook purchases, and hotels. According to court documents, he falsely claimed he was the sole owner of a business with $100,000 in gross income and submitted a forged bank statement in support of his application.

The sentence? 18 months in federal prison. Not probation. Not home confinement. Not a fine. Actual federal prison time for a loan amount that most people assume is to small to prosecute.

OK so think about what that case proves. The government didnt look at $21,000 and decide it wasnt worth there time. They investigated, built the case, prosecuted, and obtained an 18-month sentence. The resources they spent prosecuting that case almost certainly exceeded the fraud amount. They did it anyway. Becuase the goal isnt financial recovery. The goal is deterence. And sentences for small amounts send a message: there is no safe harbor based on loan size.

If your reading this becuase you took a similar amount and assumed you were safe, McClarrin’s case is the answer to your question. They investigate small loans. They prosecute small loans. They send people to prison for small loans. The amount dosent protect you.

Why Small Loans Are Actualy Easier to Prosecute

Heres the paradox nobody talks about. Small PPP fraud cases arnt harder to prosecute then large ones. There often easier. And prosecutors know this.

Think about what makes a case complex. Multiple shell companies. Layers of transactions. Sophisticated money movement. Document trails spanning months and dozens of accounts. Thats what you find in multi-million dollar schemes. Those cases require teams of agents, forensic accountants, and months of document review. There resource-intensive.

Now think about a $20,000 case. One person. One fake business. One loan application. One bank account. PPP deposit on Monday, personal purchases on Tuesday. The evidence is sitting right there. Bank records show the money came in as PPP funds. The same bank records show it went out the next day for DoorDash and hotels. No forensic accounting required. No complex money tracing. The fraud is obvious on its face.

Small cases are fast cases. A prosecutor who takes on a $20 million scheme might spend a year building the case. A prosecutor who takes on a $20,000 case can have it trial-ready in weeks. Simple cases mean easy convictions. Easy convictions mean career advancement. There is no institutional incentive to ignore small amounts when small amounts produce reliable wins.

The assumption that small loans are beneath notice gets the incentives exactaly backwards.

The $2 Million Number That Created False Comfort

Heres were the confusion comes from. Early in PPP enforcement, the Treasury Department announced it would audit all PPP loans of $2 million or greater. People heard that number and made an assumption: if there auditing loans above $2 million, then loans below that amount are safe.

That assumption conflates two completley different things: audits and prosecutions.

Treasury audits loans. DOJ prosecutes fraud. These are diffrent agencies with diffrent mandates operating on diffrent timelines. The $2 million threshold applies to Treasury’s audit program. It dosent apply to DOJ’s prosecution decisions. The DOJ explicitly stated that it would “undertake to prosecute any and all cases of apparent PPP loan fraud.” Not cases above $2 million. Not cases above $500,000. Any and all cases.

Think about the gap this created. Millions of people heard about the $2 million audit threshold. Far fewer people heard the DOJ’s statement about prosecuting any amount. The number that spread was the reassuring one. The message that should have spread – that prosecution has no floor – got lost in the noise.

If you took comfort from the $2 million number, that comfort was misplaced. The threshold protects you from a Treasury audit. It dosent protect you from a criminal investigation.

The Queue Theory: Big Cases First, Small Cases Next

Heres how enforcement actualy works when your dealing with 669,000 flagged loans and limited prosecutorial resources. You prioritize. You start with the biggest cases becuase those produce the biggest headlines. A $10 million fraud scheme gets press coverage. It justifies the budget. It demonstrates political will to pursue pandemic fraud. You announce those cases loudly.

Then you work your way down.

Look at the prosecution announcements over time. 2021-2022: mostly large-dollar schemes making national news. 2023-2024: medium-dollar cases, regional coverage. 2025 and beyond: smaller dollar amounts, local prosecutions that never make headlines but result in the same prison sentences.

The pattern is clear if you know were to look. The queue is moving. What started with million-dollar prosecutions has progressed to cases involving $50,000, $30,000, even $20,000. The cases you see in the news today arnt the end of enforcement. There the midpoint. The smaller cases are coming.

And heres what makes this worse. The enforcement machinery is getting MORE efficent, not less. Prosecutors have handled thousands of these cases now. They know the patterns. They know the defenses. They know how to build cases quickly. Every case they prosecute makes the next case easier. By the time they reach the smaller loans, theyll have perfected the process.

The delay you’ve experienced isnt mercy. Its just queue position.

$20,000 Indictments You’ve Never Heard Of

Heres what the news dosent cover: the steady stream of small-dollar PPP prosecutions happening quietly in federal courtrooms across the country. These cases dont make national headlines. There not dramatic enough. But they represent the same 97% conviction rate as the big cases.

Consider the Metro East indictments. A federal grand jury charged Katherine L. Liggins and Eric C. Scott with wire fraud and making material false statements. There crime? Each received more than $20,000 in PPP funds under false pretenses. These were federal workers. They assumed there steady government employment somehow made them invisible. The indictment proved otherwise.

Or take Kevin Wright, an employee of the Illinois Department of Corrections. He applied for a $20,595 PPP loan by falsely claiming he owned a business that didnt exist. He was charged with loan fraud exceeding $10,000, a Class 2 felony punishable by up to seven years in prison. He had a stable job. He thought a small loan wouldnt matter. Now hes facing years behind bars.

Then theres the case of “Stephen,” a public servant who submitted a PPP loan application claiming to be the sole proprietor of a non-existent business. He received $20,833. Then he submitted a second application to a diffrent lender and received another $20,833. Two small loans. Two counts of fraud. The amount was modest. The consequences were not.

These arnt high-profile defendants. There ordinary people who made the same assumption your probably making: that there loan amount was to small to matter.

The Investigation Triggers That Have Nothing to Do With Amount

Heres something most people dont understand about how PPP fraud investigations begin. The loan amount is almost never the trigger. Investigations start becuase of data patterns, tips, and automated detection – none of which care how much money was involved.

Consider the Kennedy investigation. According to enforcement records, the investigation began in May 2024 when agents learned she had no business, business income, or business expenses as she falsely stated on her PPP application. The investigation revealed she learned about the scheme on Instagram. The trigger wasnt the loan amount. The trigger was data analytics that compared her PPP application to her tax filings and found they didnt match.

Think about what triggers investigations:

Data analytics. The SBA uses automated screening tools that compare PPP applications to IRS records. If your application claims payroll that dosent match your tax filings, your flagged. The system dosent know or care if your loan was $20,000 or $2 million. It just notices the discrepancy.

Whistleblowers. Former employees. Ex-spouses. Disgruntled business partners. Anyone who knows you got PPP money and thinks you didnt deserve it can file a complaint. Under the False Claims Act, whistleblowers can recieve 15-30% of recovered funds. Thats a substantial incentive to report fraud of any size.

Hotline tips. The SBA OIG hotline recieved over 54,000 PPP-related complaints. Neighbors. Competitors. People who saw you posting on social media while claiming your business was shut down. Tips come from everywhere, and the amount of your loan dosent factor into wheather someone decides to report you.

The investigation trigger almost never considers loan size. By the time amount becomes relevant, your already under investigation.

The 10-Year Window: Why “Waiting It Out” Isnt a Strategy

Heres something that eliminates the last hope people have about small loans. In 2022, Congress extended the statute of limitations for PPP fraud from 5 years to 10 years. That extension wasnt routine. It was a deliberate decision to give prosecutors more time to work through the backlog of flagged loans – including the small ones.

If you took a first-draw PPP loan in April 2020, the government has until April 2030 to charge you. If you took a second-draw loan in May 2021, they have until May 2031. Thats 5-6 more years of enforcement activity. Five more years for the queue to move. Five more years for prosecutors to reach smaller loan amounts.

Think about what the extension signals. If the government was content to let small loans go, why would Congress give them an extra five years? The extension exists becuase they intend to prosecute cases they couldnt reach in the original timeframe. And which cases are furthest back in the queue? The smaller ones.

The people who assume there $20,000 loan is to old to prosecute are making a math error. There not counting from 2020 to 2025. There counting from 2020 to 2030. Thats a decade of enforcement runway. Plenty of time to work down to every loan amount.

The Social Media Trail That Prosecutors Love

Heres an element of small-loan prosecution that makes these cases particulary easy to build. Many small PPP loans were obtained through social media schemes. Instagram accounts. Telegram groups. TikTok tutorials. The same platforms that taught people how to get fraudulent loans also created evidence trails that prosecutors use to identify co-conspirators.

The Kennedy investigation is instructive. According to court records, agents learned she had learned about the PPP scheme on Instagram. That means there digital evidence of how she found the fraud opportunity. That means there potentialy evidence of who else was involved. That means one investigation leads to others.

If you learned about your “opportunity” from social media, if someone messaged you about how to get PPP funds, if you paid a “preparer” who found you online – you left a trail. Not just bank records and tax filings. Communication records. The same platforms that made the fraud easy also made the investigation easy.

Small loans obtained through social media schemes are some of the easiest cases to prove. The fraud pattern is obvious. The evidence is digital and permanent. The connections to other fraudsters are documented. Prosecutors dont need forensic accountants for these cases. They need subpoenas to Instagram and Telegram.

The Math Nobody Does: Defense Costs vs. Loan Amount

Heres the irony that should stop everyone whos convinced there small loan isnt worth prosecuting. The cost of defending a federal criminal case almost always exceeds the loan amount for small-dollar fraud.

Federal defense attorneys handling PPP fraud cases typically charge between $25,000 and $100,000 or more depending on case complexity. For a $20,000 PPP loan, your looking at defense costs that could reach 3-5x the original fraud amount. The “small” loan creates massive legal exposure.

And thats before restitution. If your convicted, you pay back the full loan amount plus potential penalties. For a $20,000 loan, add the defense costs, the restitution, potential fines, and the economic impact of prison time. The total damage from a “small” loan easily reaches six figures.

Think about the calculation differently. You took $20,000 in fraudulent PPP funds. Now your spending $50,000 on defense attorneys, facing $20,000 in restitution, looking at potential fines, and risking prison time that destroys your career. The total cost of that “small” loan? Potentialy hundreds of thousands of dollars in direct and indirect consequences.

The amount that seemed to small to matter becomes the centerpiece of financial catastrophe.

What “No Minimum Threshold” Actualy Means

Heres the statement that should have ended all speculation about wheather small loans are safe. The DOJ undertook to prosecute “any and all cases of apparent PPP loan fraud.” Not cases above a certain amount. Any and all.

What does that mean practically? It means prosecution decisions are based on evidence strength, not loan size. A $20,000 case with clear evidence of fraud is more attractive to prosecutors then a $200,000 case with ambiguous facts. Amount matters for sentencing. It dosent matter for wheather you get charged.

Look at the civil settlements. The government has settled False Claims Act cases for amounts as low as $23,415. They pursued those cases, litigated them, and obtained settlements for amounts that most people would consider beneath federal attention. If there pursuing civil cases at that level, what makes you think there not pursuing criminal cases at similar amounts?

The $2 million audit threshold created a misconception. The “any and all” prosecution standard is the reality. Your loan amount dosent determine wheather you get investigated. It determines how quickly prosecutors can build the case once they start.

Getting Ahead Before The Queue Reaches You

Heres what all of this means for you. If your reading this becuase you took a small PPP loan and assumed the amount protected you, that assumption was wrong. The government investigates small loans. They prosecute small loans. They send people to prison for small loans. The cases are happening right now in federal courts across the country.

The question isnt wheather small loans are safe. There not. The question is wheather you can get ahead of the queue before it reaches your file.

At Spodek Law Group, Todd Spodek and our federal defense team understand how this enforcement pipeline works. We’ve watched the prosecution priorities shift from headline-grabbing schemes to smaller cases. We’ve seen clients who assumed there $25,000 loan wasnt worth prosecuting suddenly facing federal charges. The pattern is consistent: assumption of safety followed by the shock of investigation.

Clients who come to us before the investigation becomes public have options. There may be paths to voluntary disclosure. There may be ways to cooperate that reduce exposure. There may be defenses that need to be preserved before investigators make contact. Early intervention changes outcomes in ways that waiting never does.

If you took a PPP loan and your numbers dont match what you filed with the IRS, the amount dosent protect you. Somewhere in federal databases, your application was compared to your tax records. If there was a discrepancy, it was flagged. Your just waiting to find out how far back in the queue you are.

Call us at 212-300-5196. The consultation is confidential. We can help you understand what small-loan enforcement looks like and what options exist before the knock on the door.

The loan amount was small. The consequences are not. And the investigation is coming.

There is no minimum threshold. There is only timing. And the queue is moving every day.