<p>Firms the federal government hired to distribute <a href="https://www.dailywire.com/news/only-2-of-childrens-deaths-were-from-covid-and-school-closures-didnt-reduce-the-number" target="_blank" rel="noopener">coronavirus</a> Paycheck Protection Program loans promised to use high-tech methods to prevent fraud, but failed in part because abuse hurt taxpayers and not their own bottom line, according to a congressional investigation.</p>
<p>The Select Subcommittee on the Coronavirus Crisis found that two financial tech, or &#8220;fintech,&#8221; firms allegedly earned billions in profits by taking a percentage of each loan that they processed — often while barely looking at it. Some of the firms involved had little relevant experience, and one was run by a man who pleaded guilty in 2014 to insider trading.</p>
<p>&#8220;The investigation found that two unvetted and unregulated fintechs that, together, facilitated nearly one in every three PPP loans funded in 2021 — Womply and Blueacorn — failed to implement systems capable of consistently detecting and preventing fraudulent and otherwise ineligible PPP applications,&#8221; a <a href="https://coronavirus.house.gov/sites/democrats.coronavirus.house.gov/files/2022.12.01%20How%20Fintechs%20Facilitated%20Fraud%20in%20the%20Paycheck%20Protection%20Program.pdf" target="_blank" rel="noopener">committee report</a> released Thursday said.</p>
<p>Blueacorn gave nearly $300 million in profits to its owners but spent only $8.6 million on fraud prevention, the report said. It spent far more on marketing, and Blueacorn advertised &#8220;free money&#8221; in &#8220;30 seconds&#8221; to applicants, according to the report from the committee, which is led by Rep. Jim Clyburn (D-South Carolina).</p>
<p>Blueacorn had a small company called Elev8 Advisors, which was &#8220;run by a member of Blueacorn’s senior leadership,&#8221; review loan applications, and it was staffed with dozens of friends and family of the owner. The owner, Kristen Spencer, wrote in a text message obtained by the committee: “We are doing this for the people we hired to make money. Our friends and family. That is where the money is going. And it will be life changing money for anyone who does it.”</p>
<p>Employees were told that reviewing each loan should take them &#8220;less than 30 seconds,&#8221; employees told the committee.</p>
<p>Elev8&#8217;s owners, Kristen and Adam Spencer, also received $200,000 in PPP loans — even though the pandemic had been a boon for their business, not a hardship — around the same time they purchased an $8 million mansion in cash, the report said. One of the loans claimed Kristen was an &#8220;interior architect&#8221; for her husband&#8217;s company, even though that company was located in a WeWork, according to the investigation.</p>
<p>Blueacorn&#8217;s owners focused on big loans, which brought the largest commissions, and ignored those from small business owners, writing &#8220;who f***ing cares&#8221; and &#8220;delete them,&#8221; the report said. Blueacorn is owned by Nathan Reis and Stephanie Hockridge. The company also received $300,000 in PPP loans for itself, some of which were vetted by itself. And on the application, Reis falsely claimed to be black and a veteran, the report said.</p>
<p>Another fintech company, Womply, had revenue of $2 billion in 2021 and a gross profit margin of nearly 90%. Lending partners said its anti-fraud controls were &#8220;put together with duct tape and gum,&#8221; the report said. Additionally, the SBA said that even the application for $5 million in PPP loans that Womply filed for itself was ineligible.</p>
<p>Womply CEO Toby Scammell was convicted of insider trading in 2014 and led the company&#8217;s fraud prevention efforts. He also instructed the company not to cooperate with federal investigators, the report said.</p>
<p>Criminals quickly realized that they should apply through fintech firms if they wanted fake loans approved, according to the report. One gang member said that &#8220;everybody in the hood&#8221; was using Womply, according to the report. Investigators believe the PPP loans were used to buy guns and drugs.</p>
<p>Another fintech called Kabbage approved more than 300,000 loans. Its employees were concerned that fraud rates were &#8220;wildly underestimated,&#8221; but a manager told them &#8220;the risk here is not ours – it is SBA’s risk,” the report said.</p>
<p>The report concluded that &#8220;Based on these findings, Congress and the SBA should consider carefully whether unregulated businesses such as fintechs, many of which are not subject to the same regulations as financial institutions, should be permitted to play a leading role in future federal lending programs.&#8221;</p>
<p>The PPP program is overseen by the Small Business Administration. The SBA’s Inspector General has said the levels of fraud present in the PPP program were “unprecedented,” and that &#8220;This problem occurred because the agency did not establish a sufficient fraud risk framework at the start of and throughout PPP implementation.”</p>
<p><strong>Related: <a href="https://www.dailywire.com/news/biden-uses-little-known-covid-waiver-to-write-off-9b-in-student-loans-for-150000-government-nonprofit-workers">Biden Uses Little-Known COVID Waiver To Write Off $9B In Student Loans For 150,000 Government, Nonprofit Workers</a></strong></p>

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Coronavirus Loan Fraud Prevention Fell To ‘Unvetted’ Firms That Profited Hugely While Ignoring Fraud, Congress Finds