PPP Fraud Crackdown Continues: Financial Tech Firm Gets Caught Stealing PPP Loans

Following our article titled PPP Fraud Crackdown Continues: Federal Investigations, Prosecutions, and Lessons for Businesses, the Select Subcommittee’s findings in the Blueacorn case provide a concrete example of  how insufficient oversight and enforcement of the Paycheck Protection Program has resulted in failures in prevention and misuse of taxpayer dollars.

Nathan Reis and Stephanie Hockridge, the co-founders of Blueacorn, a Scottsdale-based Fintech firm that partnered with SBA approved lenders to help prepare and submit loan applications, have plead guilty to a case involving COVID-19 business relief funds under the Paycheck Protection Program (PPP). Reis has plead guilty to conspiracy to commit wire fraud, while Hockridge, who was also a news anchor for ABC15 from 2011-2018, was charged with the same offense. Prosecutors alleged that the two, along with other close associates, engaged in a scheme to misrepresent loan applications and improperly profit from the program.

From April 2020 until May 2021, Reis and his co-conspirators agreed to submit applications using fabricated tax documents, altered bank statements, and other documents with misrepresentations to obtain PPP loans. While Blueacorn publicly promoted its services as a streamlined platform for independent contractors and small business owners, prosecutors alleged that much of its focus was on securing loans for select clients through a “VIPPP” program that offered personalized application assistance. In total, Blueacorn processed applications seeking more than $12 billion in PPP loans.

According to a congressional subcommittee, Blueacorn received more than $1 billion in taxpayer-funded processing fees for its PPP work,  distributing approximately $300 million in profits to its owners, while only spending $8.6 million on its fraud prevention program Additionally, $666 million was distributed to a marketing firm controlled by members of its senior leadership, while just $13.7 million was allocated to eligibility verification intended to detect fraud.

The Select Subcommittee on the Coronavirus Crisis released a 129-page report criticizing fintech companies, including Blueacorn, for failing to implement effective safeguards while profiting significantly from the PPP program. Blueacorn’s loan reviewers reported receiving poor training and were pressured to “push through” PPP loans, even if they thought that the loan’s supporting documents were not authenticated. Reis and Hockridge also attempted to directly charge some applicants a 10% fee—an explicit violation of SBA rules— and are alleged to have personally taken more than $120 million in taxpayer-funded processing fees. The report was referred to the Department of Justice for a potential criminal investigation, and recommendations have been made to the Small Business Administration (SBA) to strengthen oversight of emergency lending.

Additionally, the circumstances under which Blueacorn’s founders obtained PPP loans have come under scrutiny. Reis and Hockridge received nearly $300,000 when Reis claimed minority and veteran status to qualify for funds. Other affiliated consultants and family members, such as Elev8 Advisors, received loans for themselves as well.

In December 2021, a company spokesperson said Hockridge and Reis no longer had active roles at Blueacorn.

The Blueacorn case highlights how weaknesses in PPP oversight created opportunities for abuse, leaving both government agencies and legitimate small businesses as victims of fraud. As enforcement efforts continue, fintech companies remain under scrutiny for their role in administering federal relief programs.

This case also illustrates the importance of experienced professionals assisting in white-collar investigations and internal forensic reviews.  Leveraging forensic and investigative professionals—like Anchin’s Regulatory Compliance and Investigations team—helps organizations identify red flags, uncover and dismantle fraudulent schemes, and implement controls to reduce exposure to future enforcement risk. In high-stakes situations involving fraud, misuse of federal funds, or executive misconduct, having a team that understands both the investigative process and financial complexity is essential.

To learn more about PPP-related fraud investigations, trends in white-collar crime enforcement, or how your business can strengthen internal controls to mitigate risk, please contact Brian Sanvidge, Principal & Leader of Anchin’s Regulatory Compliance & Investigations Group, or your Anchin Relationship Partner.