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President Donald Trump’s administration is moving aggressively to root out corruption and fraud in Minnesota, freezing millions in federal aid and suspending thousands of borrowers amid what officials describe as one of the largest welfare and pandemic-era fraud schemes in U.S. history.
Federal Small Business Administration head Kelly Loeffler announced Thursday that the agency suspended 6,900 Minnesota borrowers suspected of fraudulent activity, affecting nearly 7,900 PPP and EIDL loans worth approximately $400 million.
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She warned that these individuals will be banned from all SBA loan programs going forward, including disaster loans, and that cases will be referred to federal law enforcement for prosecution and repayment.
Loeffler said Minnesota is just the first state under review for pandemic-era fraud, signaling a broader crackdown under the Trump administration’s America First agenda. She stressed that after years of unchecked abuse, the American people would finally see those who stole from taxpayers held accountable.
Earlier this month, Loeffler had notified Minnesota Gov. Tim Walz that the SBA would immediately halt more than $5.5 million in annual support to resource partners in the state until further notice.
The freeze targets Small Business Development Centers, women’s business centers, microloan programs, and other federal disbursements, effectively pausing the entire 2025 schedule of SBA support to Minnesota.
The move comes as investigations reveal that Minnesota became ground zero for pandemic-era fraud, with a Somali-centered criminal network reportedly siphoning at least $1 billion through welfare and Medicaid programs, contributing to a total estimated loss of $9 billion.
U.S. Attorney Joseph Thompson confirmed that billions in Medicaid funding were likely lost to fraud, calling it an unprecedented abuse of taxpayer dollars.
Loeffler said the Walz administration bears responsibility for allowing this system to metastasize, dismissing early warnings from legislators and whistleblowers and labeling oversight efforts as racially insensitive. She blamed the governor for making Minnesota the epicenter of one of the largest fraud scandals of the COVID-19 era, describing the state’s policies as deliberately designed to pump out welfare funding without oversight or accountability.
Federal scrutiny has expanded beyond the SBA. The USDA and Treasury Department are now investigating misuse of SNAP and other benefit programs, while the Department of Health and Human Services has frozen childcare payments to Minnesota amid reports that taxpayer dollars were funding daycares that appeared vacant, according to independent reporting.
Trump administration officials point to failures in the Paycheck Protection Program and Economic Injury Disaster Loan initiatives as prime examples of Minnesota’s corruption. Approximately $2.5 million in PPP and EIDL funds were tied directly to fraudulent activity, while an additional $430 million in PPP loans flagged as potentially fraudulent were still disbursed and, in many cases, forgiven under the previous administration.
The scale of the abuse has shocked even seasoned officials. Loeffler described the volume and concentration of fraud as matched only by the administration’s inadequate response, noting that criminal networks exploited the state’s generous welfare and pandemic programs while oversight was ignored.
She warned that taxpayers would no longer foot the bill for fraudulent schemes and that federal resources would be redirected to law-abiding small business owners. “SBA’s responsibility is to taxpayers and small business owners, not to criminals or the politicians who enable them,” Loeffler said.
The action has drawn praise from supporters of President Trump, who argue it reflects a return to strict accountability and enforcement after years of permissive governance. They say Minnesota’s systemic failures provide a cautionary tale of what happens when political correctness and ideology override fiscal responsibility.
Critics of the Walz administration cite repeated warnings about potential abuse during the pandemic, including whistleblowers and legislators flagging irregularities in funding disbursements, which were largely ignored. Federal officials now emphasize that Minnesota’s problems were not isolated incidents but part of a larger pattern of endemic fraud facilitated by lax state oversight.
Independent reporting highlighted vacant daycares allegedly receiving taxpayer dollars, prompting the Department of Health and Human Services to freeze payments. These investigations have fueled the broader effort to hold state and local officials accountable for mismanagement and corruption.
