The Small Business Administration (SBA) has suspended 111,620 California borrowers suspected of committing fraudulent activity related to COVID-19 pandemic-era loan grants, the agency said in a Feb. 6 statement.
The fraud involves the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program. PPP, established under the Coronavirus Aid, Relief, and Economic Security Act, provided funds to small businesses to cover up to eight weeks of employee payroll expenses, including benefits.
The COVID-19 pandemic EIDL loans provided funds to help small businesses recover from the COVID-19 pandemic’s negative impacts.
The fraudulent borrowers in California received 118,489 PPP and EIDL loans totaling more than $8.6 billion.
Kelly Loeffler, SBA administrator, said this was the “most significant crackdown” on those who have defrauded COVID-19 pandemic programs.
“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 said. ”As we continue our state-by-state work, our message is clear: pandemic-era fraudsters will not get a pass under this Administration.”
In a Feb. 6 post on X, Loeffler said she visited an address in San Diego linked to 14 small businesses formed during the COVID-19 pandemic that received more than $2 million in COVID-19 pandemic loans, which have yet to be fully repaid.
The agency will pursue criminal referrals regarding the $8.6 billion fraud with the Department of Justice, she said.
The office of California Gov. Gavin Newsom did not respond to a request for comment.
In Minnesota, Loeffler announced halting $5.5 million in federal payments in December 2025, citing fraud scandals.
In a letter to Minnesota Gov. Tim Walz, Loeffler said SBA had granted 13,600 COVID-19 pandemic relief loans worth $430 million that are “suspected as fraudulent.”
The SBA administrator said the agency suspended 6,900 Minnesota borrowers, who had been approved for 7,900 PPP and EIDL loans worth roughly $400 million, amid suspected fraudulent activity, according to a Jan. 1 post on X.
“These individuals will be banned from all SBA loan programs, including disaster loans, going forward,” she wrote. “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.”
Punishing Perpetrators
On Feb. 2, SBA announced that the last of the eight defendants in a $7.7 million COVID-19 pandemic fraud scheme targeting the agency and several state unemployment programs had been sentenced.
The defendants used more than 1,000 bogus unemployment claims to obtain more than $5.6 million, it said. They used the names, Social Security numbers, and other personal information of unsuspecting individuals to carry out the fraud.
Jennifer Runyan, special agent in charge of the FBI Detroit Field Office, said the lives of more than 900 victims were disrupted because of the scheme.
“Among those victims was a nurse working 12-plus hour shifts on the front lines during COVID-19, who then had to fight to clear her name after her identity was stolen,” Runyan said.
“These defendants did not just steal money; they stole peace of mind from hardworking Americans during a national crisis.”
In December 2025, the Government Accountability Office (GAO) told the Senate Committee on Small Business and Entrepreneurship that although the public health emergency resulting from the COVID-19 pandemic had ended, some government programs were still being exploited by fraudsters.
Since June 2020, GAO has made several recommendations to the SBA to improve its COVID-19 pandemic relief programs, according to Courtney LaFountain, acting director of Financial Markets and Community Investments at GAO.
“GAO has estimated that the additional controls SBA put in place for its pandemic-relief programs collectively had saved the government more than $30 billion as of the end of fiscal year 2025,” LaFountain said.
