American Banker, "Blueacorn founder convicted of PPP fraud conspiracy" June 24, 2025 — trial coverage including Flore...
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Fraud Blueacorn founder convicted of PPP fraud conspiracy By Catherine Leffert Published June 24, 2025, 2:36 p.m. EDT 3 Min Read Bloomberg One of the founders of Blueacorn — a fintech developed during the heyday of the pandemic-era Paycheck Protection Program — was found guilty by a federal jury of conspiring to fraudulently obtain tens of millions of dollars from the initiative. Processing Content The conviction is the latest in a trail of fraud left by PPP. The program's speedy rollout in 2020 during the peak of the COVID-19 pandemic helped accomplish its mission of stifling job losses across the country, but with PPP's haste came vulnerability to bad actors. Blueacorn's Stephanie Hockridge was convicted of being connected to a scheme to submit false and fraudulent PPP loan applications, the Department of Justice said Monday. "Ms. Hockridge defrauded the federal government of millions of dollars in pandemic relief funds for her own personal gain and has been brought to justice," Special Agent in Charge Jon Ellwanger of the Office of Inspector General for the Federal Reserve Board and Consumer Financial Protection Bureau Western Region said in a prepared statement. The government said Hockridge fabricated documents, including payroll records, tax documentation and bank statements, to pull in larger loans for certain applicants. Blueacorn then charged borrowers kickbacks based on a percentage of the funds received, the DOJ said, meaning the fintech earned more proceeds for bigger PPP loans. Blueacorn offered a service to clients called "VIPPP," which Hockridge staffed with co-conspirators to work as referral agents and to coach borrowers on how to submit false information, the DOJ found. Hockridge and her Blueacorn co-founder Nathan Reis, who are married, were originally indicted last fall on four counts of wire fraud and one count of conspiracy to commit wire fraud. While Hockridge was acquitted of the wire fraud charges, she could still be sentenced to up to 20 years in prison for her conviction of conspiracy to commit wire fraud. Her sentencing is scheduled for Oct. 10. Reis hasn't yet received a verdict. The defendants' attorneys did not respond to a request for comment. The DOJ declined to respond beyond public statements and court filings. PPP — made up of hundreds of billions of dollars earmarked by the Coronavirus Aid, Relief and Economic Security, or CARES, Act for the Small Business Administration — has been rife with claims and convictions of fraud, especially among fintechs that jumped in as banks were overloaded. "This program was designed to provide critical funds to those struggling during a national crisis, not line the pockets of people seeking to exploit government assistance," Assistant Director Jose Perez of the FBI Criminal Investigative Division said in a prepared statement. The DOJ, through its criminal division, has prosecuted more than 200 defendants in over 130 criminal cases and seized more than $78 million in cash proceeds from fraudulently obtained PPP loans, along with real estate properties and luxury items purchased with such funds. In 2023, an SBA investigation estimated that the agency disbursed more than $200 billion in potentially fraudulent PPP loans, COVID-19 Economic Injury Disaster Loans and EIDL-targeted advances — close to one-fifth of all such funds. Fraud Kabbage, a bankrupt fintech lender, settles PPP fraud case with DOJ The small business lender's bankrupt shell has agreed to pay up to $120 million in connection with allegations that its verification processes for Paycheck Protection Program loan applications were faulty. The government argued that Kabbage reaped larger fees by enabling fraudulently inflated loans. By Polo Rocha May 14 Last year, the bankrupt remnants of fintech Kabbage reached a $120 million settlement with the DOJ for allegations of PPP blunders. The government claimed that Kabbage's actions defrauded the program, and that the lender botched its fraud detection controls, leading to larger fees from the government for processing oversized loans. The fintech acknowledged as part of the settlement that it double-counted some employee taxes, didn't properly calculate leave and severance payments, and didn't exclude wages above $100,000, per the PPP rules. The government also claimed Kabbage knew about the issues, didn't fix them and removed steps from its underwriting process. Blueacorn has been flagged by the Pandemic Response Accountability Committee, academic reports and government investigations multiple times in the past several years for its lax risk management. In 2022, a report from the House Select Subcommittee on the Coronavirus Crisis found that Blueacorn and another fintech called Womply facilitated nearly one in every three PPP loans funded in 2021 but said those companies "failed to implement systems capable of consistently detecting and preventing fraudulent and otherwise ineligible PPP applications." The FBI, the IRS's Criminal Investigation division, the special inspector general for pandemic recovery, the Federal Reserve Board-Consumer Financial Protection Bureau Office of the Inspector General and the SBA OIG investigated the Hockridge case, which was prosecuted in the northern district of Texas. 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