House Subcommittee: Fintechs Committed PPP Fraud

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Facts

  • The US House Select Committee on the Coronavirus Crisis released a report Thursday alleging financial tech firms, known as "fintechs," schemed to profit off the taxpayer-funded Paycheck Protection Program (PPP) during the pandemic.
  • One such fintech, Arizona-based Blueacorn, which is co-owned by Nathan Reis and his wife Stephanie Hockridge-Reis, has been accused of raking in $120M in processing fees while handing out billions in PPP loans but spent less than 1% of the fees on fraud protection.
  • Using third-party companies and contractors to process the loans meant for businesses with fewer than 500 workers, Blueacorn’s owners charged $37-$55 per hour or $2-$8 per application. They allegedly collected $300K in loans themselves by incorrectly claiming to be African American and a military veteran.
  • Contrary to the goals of PPP, Blueacorn prioritized larger loan applicants to make the most profit. Hockridge-Reis, a former news anchor for the local Channel 15 station, is reportedly quoted in Slack messages saying, "We're not the first bank to decline borrowers who deserve to be funded."
  • In addition to Blueacorn, fintechs Bluevine, Womply, and American Express-owned Kabbage were included in the report. Womply reportedly allowed "rampant fraud."
  • The US Dept. of Justice (DOJ) is expanding its prosecutions related to the potential $80B in PPP fraud to include the larger scams, such as starting a False Claims Act investigation into Kabbage in June. Committee chairman Rep. Jim Clyburn (D-S.C.) has also asked the Small Business Administration (SBA) and Inspector General's office to investigate.

Sources: Washington Post, NBC, USA Today, and Reuters.

Narratives

  • Pro-establishment narrative, as provided by ProPublica. Through diligent reporting by several journalistic outlets and effective government oversight, these horrendous PPP frauds are being exposed. These investigations could go a long way toward the DOJ holding fintechs accountable and could even lead to recouping some of the ill-gotten funds.
  • Establishment-critical narrative, as provided by The Washington Free Beacon. The Small Business Administration (SBA) should get just as much flack as the fintechs. The SBA helped create the inflation crisis in the US by failing to build safeguards to prevent such fraud, leading to the needless distribution of billions of dollars. This is what happens when the federal government rushes to "put money out on the street."