Houston man charged with investing PPP loan money in crypto

Dive Brief:

  • The Justice Department (DOJ) charged a Houston man this week in a plan to obtain two fraudulent Paycheck Protection Program (PPP) loans and invest funds from one of them in a cryptocurrency account.
  • The loans, worth a total of $1.1 million, were filed on behalf of businesses called Texas Barbecue and Houston Landscaping. Joshua Thomas Argires, 29, claimed both companies had numerous employees and hundreds of thousands of dollars in payroll expenses, but neither has employees nor pays wages consistent with the amounts claimed in the PPP applications, according to the DOJ’s complaint.
  • Argires, 29, is charged with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions.

Dive Insight:

The Texas case is hardly the first PPP-related fraud concern the Justice Department has raised. Two New England businessmen were charged in May with conspiracy to commit bank fraud and conspiracy to make false statements to the Small Business Administration (SBA) after they sought more than $543,000 in PPP loans.

A Government Accountability Office (GAO) report in June said the number of loans approved through PPP, the speed with which they were processed, and the program’s limited safeguards leave it open to “significant risk that some fraudulent or inflated applications were approved.”

Both of Argires’s loans were funded, but none of the funds were used for payroll or other expenses authorized under the PPP, the Justice Department said. The funds received on behalf of Texas Barbecue were invested in a cryptocurrency account. Per the PPP loan-level data provided by the SBA, Texas Barbecue’s loan was processed by PrimeWay Federal Credit Union. Houston Landscaping’s funds were held in a bank account and “slowly depleted via ATM withdrawals,” according to the charges, and this loan was processed by Bank of America.

Duplicate loans have been a concern throughout the program. The SBA’s loan processing system failed to see when some borrowers submitted multiple applications with different lenders, people with knowledge of the matter told Reuters last month. Information from the wire service’s sources — and some Reddit posts — suggest at least 1,020 duplicate deposits were issued, potentially accounting for $116 million.

Although the SBA disclosed a list last week of recipients of PPP loans less than $150,000, analysts have found numerous flaws in the data. Particularly, more than 878,000 of the 4.9 million applications processed listed the number of jobs retained by borrowers as zero, or the field was left blank entirely, according to Bloomberg data.

Even after receiving coronavirus relief through PPP, about 22% of borrowers have fired or expect to lay off at least one worker, according to a survey published last week by the National Federation of Independent Business.

Read More