The Trump administration has suspended 6,900 borrowers in Minnesota over suspected fraud involving approximately $400 million in taxpayer-funded Covid relief loans. The move, announced by Small Business Administration (SBA) boss Kelly Loeffler, represents a major escalation in the federal crackdown on pandemic aid misuse.
Wide-Ranging Suspensions and a Political Firestorm
Kelly Loeffler stated on social media platform X that the affected individuals would be banned from all future SBA loan programmes, including disaster loans. The suspensions target 7,900 Paycheck Protection Program (PPP) and Economic Injury Disaster loans approved during the health crisis.
This action increases pressure on Democratic Minnesota Governor Tim Walz, whose administration faces intense scrutiny over billions in suspected social services fraud. In a separate letter to Governor Walz last week, Loeffler criticised the state's response, calling the volume of potential fraud 'staggering'.
Roots in the 'Feeding Our Future' Scandal
The current loan crackdown stems directly from a sprawling investigation into the 'Feeding Our Future' programme. This non-profit is accused of billing for millions of non-existent meals for children during the pandemic. Prosecutors say defendants used stolen $250 million to fund lavish purchases, including luxury cars and overseas property.
US Attorney Joe Thompson revealed on December 18 that a much wider fraud network may have stolen around $9 billion in federal Medicaid funds supporting 14 Minnesota programmes since 2018. Of the 92 defendants charged in related child nutrition, housing, and autism programme scams, 82 are Somali.
Community Impact and Ongoing Investigations
The SBA confirmed at least $2.5 million in pandemic loans were tied to a Somali fraud scheme in Minneapolis. A viral video posted by journalist Nick Shirley allegedly showed empty Somali-owned daycare centres receiving vast taxpayer sums, prompting federal investigations.
While Governor Walz has rejected the $9 billion fraud estimate as 'sensationalism', citing state audits closer to $300 million, the political fallout is significant. The House Oversight Committee has scheduled hearings, with Governor Walz set to testify on February 10.
Community leaders have stressed that those accused represent a tiny fraction of Minnesota's large Somali diaspora, the largest in the US, and have condemned the fraud while warning against collective blame.
