Appendix in Support of Plaintiff’s Omnibus Memorandum of Law in Opposition to Defendants’ Motions to Dismiss the Complaint (appendix, Exhibit 1 and Exhibits A–E and G), KServicing Wind Down Corp. v. Frohwein, Adv. No. 25-52372 (Bankr. D. Del.), Docs. 117, 117-1 to 117-6 and 117-8 (June 9, 2026)
Summary
The Appendix in Support of Plaintiff's Omnibus Memorandum of Law in Opposition to Defendants' Motions to Dismiss the Complaint, dated June 9, 2026, in KServicing Wind Down Corp. (f/k/a Kabbage, Inc.) v. Robert Frohwein, et al., Adv. No. 25-52372 (CTG), in the United States Bankruptcy Court for the District of Delaware, Doc. 117. The exhibit index lists a declaration of Emma Culotta, an email, a draft Bank Secrecy Act and Anti-Money Laundering policy, a letter to Duff & Phelps and a presentation by Duff & Phelps. It also lists a staff report of the Select Subcommittee on the Coronavirus Crisis and Proof of Claim No. 247 filed by the United States Department of Justice, Civil Division, dated April 3, 2023. The signature blocks of Reid Collins & Tsai LLP and Morris James LLP follow.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Cited in: Kathryn Petralia · Robert Frohwein
Cite this document
“Appendix in Support of Plaintiff’s Omnibus Memorandum of Law in Opposition to Defendants’ Motions to Dismiss the Complaint (appendix, Exhibit 1 and Exhibits A–E and G), KServicing Wind Down Corp. v. Frohwein, Adv. No. 25-52372 (Bankr. D. Del.), Docs. 117, 117-1 to 117-6 and 117-8 (June 9, 2026).”
Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/appendix-in-support-of-plaintiff-s-omnibus-memorandum-of-law-in-opposi-f8b8b1e72b/
, SHA-256 6e7684e8658604f797175f64c711e38e77aa0005d64e1acb539e0b045cbda869.Full text
Case 25-52372-CTG Doc 117 Filed 06/09/26 Page 1 of 4
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
KSERVICING WIND DOWN CORP., et al.,1
Case No. 22-10951 (CTG)
Post-Confirmation Debtors.
(Jointly Administered)
KSERVICING WIND DOWN CORP.
(f/k/a Kabbage, Inc.),
Adversary Proceeding
Plaintiff,
No. 25-52372 (CTG)
v.
ROBERT FROHWEIN, et al.,
Defendants.
APPENDIX IN SUPPORT OF PLAINTIFF’S OMNIBUS MEMORANDUM OF LAW IN
OPPOSITION TO DEFENDANTS’ MOTIONS TO DISMISS THE COMPLAINT
REID COLLINS & TSAI LLP
Dated: June 9, 2026
Jessica Zeldin (DE Bar No. 3558)
300 Delaware Ave., Suite 770
Wilmington, DE 19801
T: (302) 467-1765
jzeldin@reidcollins.com
Eric D. Madden (PHV granted)
Brian J. Bah (PHV granted)
1445 Ross Avenue, Suite 2900
Dallas, Texas 75202
1
The post-confirmation Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax
identification number, as applicable are: KServicing Wind Down Corp. (f/k/a Kabbage, Inc. d/b/a KServicing) (3937);
KServicing Wind Down Canada Holdings LLC (f/k/a Kabbage Canada Holdings, LLC) (N/A); KServicing Wind
Down Asset Securitization LLC (f/k/a Kabbage Asset Securitization LLC) (N/A); KServicing Wind Down Asset
Funding 2017-A LLC (f/k/a Kabbage Asset Funding 2017-A LLC) (4803); KServicing Wind Down Asset Funding
2019-A LLC (f/k/a Kabbage Asset Funding 2019-A LLC) (8973); and KServicing Wind Down Diameter LLC (f/k/a
Kabbage Diameter, LLC) (N/A). The Debtors’ mailing and service address is KServicing Wind Down Corp. c/o
Resolute Commercial Services, 6750 E. Camelback Road, Suite 103, Scottsdale, AZ 85251.
Case 25-52372-CTG Doc 117 Filed 06/09/26 Page 2 of 4
T: (214) 420-8900
emadden@reidcollins.com
bbah@reidcollins.com
Joshua J. Bruckerhoff (PHV granted)
Jeremy H. Wells (PHV granted)
Emma Culotta (PHV granted)
1301 S. Capital of Texas Highway, C-300
Austin, Texas 78746
T: (512) 647-6100
jbruckerhoff@reidcollins.com
jwells@reidcollins.com
eculotta@reidcollins.com
-and-
MORRIS JAMES LLP
Eric J. Monzo (DE Bar No. 5214)
Tara C. Pakrouh (DE Bar No. 6192)
3205 Avenue North Blvd., Suite 100
Wilmington, DE 19803
T: (302) 888-6800
emonzo@morrisjames.com
tpakrouh@morrisjames.com
Attorneys for Plaintiff
2
Case 25-52372-CTG Doc 117 Filed 06/09/26 Page 3 of 4
Exhibit Description App. No.
1 Declaration of Emma Culotta in Support of Plaintiff’s Omnibus B000001
Memorandum of Law in Opposition to Defendants’ Motions to Dismiss
A Email from A. Zimmerman to Scott Askins, cc Kathryn Petralia, re: B000004
Fwd: Confidential Employee Complaint, dated April 17, 2020, with
attachment
B Draft of Kabbage’s Enterprise Bank Secrecy Act / Anti-Money B000007
Laundering and Office of Foreign Assets Control Policy, dated April 27,
2020
C Emails between E. Maiellaro and Scott Askins, re: compliance B000026
coverage, dated June 4, 2020
D Letter from the Chief Financial Officer of Kabbage to Duff & Phelps, B000028
dated August 11, 2020
E Presentation by Duff & Phelps titled “Solvency Analysis Related to a B000034
Proposed Distribution,” dated October 15, 2020
F Staff Report of the Select Subcommittee on the Coronavirus Crisis, B000057
United States House of Representatives, titled, “‘We Are Not the Fraud
Police’: How Fintechs Facilitated Fraud in the Paycheck Protection
Program,” dated December 2022
G Proof of Claim No. 247 (Official Form 410), filed by the United States B000187
Department of Justice, Civil Division, dated April 3, 2023
3
Case 25-52372-CTG Doc 117 Filed 06/09/26 Page 4 of 4
Dated: June 9, 2026
REID COLLINS & TSAI LLP
/s/ Jessica Zeldin
Jessica Zeldin (DE Bar No. 3558)
300 Delaware Ave., Suite 770
Wilmington, DE 19801
T: (302) 467-1765
jzeldin@reidcollins.com
Eric D. Madden (PHV granted)
Brian J. Bah (PHV granted)
1445 Ross Avenue, Suite 2900
Dallas, Texas 75202
T: (214) 420-8900
emadden@reidcollins.com
bbah@reidcollins.com
Joshua J. Bruckerhoff (PHV granted)
Jeremy H. Wells (PHV granted)
Emma Culotta (PHV granted)
1301 S. Capital of Texas Highway, C-300
Austin, Texas 78746
T: (512) 647-6100
jbruckerhoff@reidcollins.com
jwells@reidcollins.com
eculotta@reidcollins.com
-and-
MORRIS JAMES LLP
/s/ Eric J. Monzo
Eric J. Monzo (DE Bar No. 5214)
Tara C. Pakrouh (DE Bar No. 6192)
3205 Avenue North Blvd., Suite 100
Wilmington, DE 19803
T: (302) 888-6800
emonzo@morrisjames.com
tpakrouh@morrisjames.com
Attorneys for Plaintiff
4
Case 25-52372-CTG Doc 117-1 Filed 06/09/26 Page 1 of 4
EXHIBIT 1
Case 25-52372-CTG Doc 117-1 Filed 06/09/26 Page 2 of 4
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
KSERVICING WIND DOWN CORP., et al., 1
Case No. 22-10951 (CTG)
Post-Confirmation Debtors.
(Jointly Administered)
KSERVICING WIND DOWN CORP.
(f/k/a Kabbage, Inc.),
Adversary Proceeding
Plaintiff,
No. 25-52372 (CTG)
v.
ROBERT FROHWEIN, KATHRYN PETRALIA,
LESLIE SCOTT ASKINS, SPENCER ROBINSON,
SAM TAUSSIG, DON BUTLER, JONATHAN
EBINGER, ALEX CHULACK, LAURIE
HODRICK, BRYAN STOLLE, IOANNIS PIPILIS,
THOMVEST VENTURES LTD., BLUERUN
VENTURES IV, LP, BRV OPPORTUNITIES
FUND, L.P., REVERENCE CAPITAL PARTNERS
OPPORTUNITIES FUND I, L.P., REVERENCE
CAPITAL PARTNERS OPPORTUNITIES FUND I
(CAYMAN), L.P., RCP KICKER CO-INVEST,
L.P., REVERENCE CAPITAL PARTNERS
OPPORTUNITIES FUND I (AI), L.P., MDV IX,
L.P., SOFTBANK VISION FUND (AIV M2) L.P.,
SOFTBANK PRINCEVILLE INVESTMENTS,
L.P., CURIEUX LIMITED CO., BENNU
HOLDINGS LIMITED CO., RAYMOND JAMES
& ASSOCIATES, INC. CSDN FBO ROBERT
FROHWEIN RIRA U/A/D 5/27/16 A/C 2867A298,
and THE FROHWEIN FAMILY 2015 TRUST,
Defendants.
1
The post-confirmation Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax
identification number, as applicable are: KServicing Wind Down Corp. (f/k/a Kabbage, Inc. d/b/a KServicing) (3937);
KServicing Wind Down Canada Holdings LLC (f/k/a Kabbage Canada Holdings, LLC) (N/A); KServicing Wind
Down Asset Securitization LLC (f/k/a Kabbage Asset Securitization LLC) (N/A); KServicing Wind Down Asset
Funding 2017-A LLC (f/k/a Kabbage Asset Funding 2017-A LLC) (4803); KServicing Wind Down Asset Funding
2019-A LLC (f/k/a Kabbage Asset Funding 2019-A LLC) (8973); and KServicing Wind Down Diameter LLC (f/k/a
Kabbage Diameter, LLC) (N/A). The Debtors’ mailing and service address is KServicing Wind Down Corp. c/o
Resolute Commercial Services, 6750 E. Camelback Road, Suite 103, Scottsdale, AZ 85251.
B000001
Case 25-52372-CTG Doc 117-1 Filed 06/09/26 Page 3 of 4
DECLARATION OF EMMA CULOTTA IN SUPPORT OF PLAINTIFF’S
OMNIBUS MEMORANDUM OF LAW IN OPPOSITION TO
DEFENDANTS’ MOTIONS TO DISMISS THE COMPLAINT
Emma Culotta, an attorney duly admitted to practice law pro hac vice before this Court,
declares the following under penalty of perjury:
1. I am a senior associate of the law firm of Reid Collins & Tsai LLP, and counsel for
Plaintiff KServicing Wind Down Corp. (f/k/a Kabbage, Inc. d/b/a KServicing). I make this
Declaration based on my personal knowledge, information and belief, and aver that the exhibits
which are cited in Plaintiff’s Omnibus Opposition to Defendants’ Motions to Dismiss the
Complaint are true and correct.
2. Attached in Plaintiff’s Appendix as Exhibit A is a copy of an email from A.
Zimmerman to Scott Askins, cc Kathryn Petralia, re: Fwd: Confidential Employee Complaint,
dated April 17, 2020, with attachment, which is incorporated by reference by paragraph 95 of the
Complaint.
3. Attached in Plaintiff’s Appendix as Exhibit B is a copy of the April 27, 2020 draft
of Kabbage’s Enterprise Bank Secrecy Act / Anti-Money Laundering and Office of Foreign Assets
Control Policy, which is incorporated by reference by paragraphs 11, 20, 82, and 194 of the
Complaint.
4. Attached in Plaintiff’s Appendix as Exhibit C is a copy of emails between E.
Maiellaro and Scott Askins, re: compliance coverage, dated June 4, 2020, which is incorporated
by reference by paragraph 20 of the Complaint.
5. Attached in Plaintiff’s Appendix as Exhibit D is a copy of a letter from the Chief
Financial Officer of Kabbage to Duff & Phelps dated August 11, 2020, which is incorporated by
reference by paragraphs 240 and 246–48 of the Complaint.
2
B000002
Case 25-52372-CTG Doc 117-1 Filed 06/09/26 Page 4 of 4
6. Attached in Plaintiff’s Appendix as Exhibit E is a copy of a presentation by Duff
& Phelps titled “Solvency Analysis Related to a Proposed Distribution,” dated October 15, 2020,
which is incorporated by reference by paragraph 271 of the Complaint.
7. Attached in Plaintiff’s Appendix as Exhibit F is a copy of the Staff Report of the
Select Subcommittee on the Coronavirus Crisis, United States House of Representatives, titled,
“‘We Are Not the Fraud Police’: How Fintechs Facilitated Fraud in the Paycheck Protection
Program,” dated December 2022, which is incorporated by reference by paragraph 280 of the
Complaint and available to the public at https://coronavirus-democrats-
oversight.house.gov/sites/evo-subsites/coronavirus-democrats-
oversight.house.gov/files/2022.12.01%20How%20Fintechs%20Facilitated%20Fraud%20in%20t
he%20Paycheck%20Protection%20Program.pdf and subject to judicial notice.
8. Attached in Plaintiff’s Appendix as Exhibit G is a copy of Proof of Claim No. 247
(Official Form 410), filed by the United States of America on behalf of the United States
Department of Justice, Civil Division, and the United States Attorney’s Office for the Eastern
District of Texas, on April 3, 2023, in the matter of In re Kabbage, Inc. d/b/a KServicing, et al.,
Case No. 22-10951 (CTG), in the United States Bankruptcy Court for the District of Delaware, in
the amount of $346,157,724.00, with attachment, which is incorporated by reference by paragraph
282 of the Complaint and subject to judicial notice.
Executed this 9th day of June, 2026.
/s/ Emma Culotta
Emma Culotta (PHV Admitted)
REID COLLINS & TSAI LLP
1301 S. Capital of Texas Highway, C-300
Austin, Texas 78746
T: (512) 647-6100
eculotta@reidcollins.com
Attorney for Plaintiff
3
B000003
Case 25-52372-CTG Doc 117-2 Filed 06/09/26 Page 1 of 4
EXHIBIT A
Amy Zimmerman <azimmerman@kabbage.com>
Case 25-52372-CTG on behalf
Doc 117-2 Filed of
06/09/26 Page 2 of 4
From:
Amy Zimmerman <azimmerman@kabbage.com>
Sent: Friday, April 17, 2020 3:02 PM
To: Scott Askins <saskins@kabbage.com>
Cc: Kathryn Petralia <kpetralia@kabbage.com>
Subject: Fwd: Confidential Employee Complaint
Attach: Dear Kabbage Human Resources and Legal 2020.pdf; ATT00002.bin
Hey Scott,
This email was intended for you and me. Unfortunately, she sent it to you and Scott Asher instead. I’ll leave it to you to take
from here.
All the best,
Amy M. Zimmerman
M: 404.502.1744
...via mobile
Begin forwarded message:
From: "nhill181@outlook.com" <nhill181@outlook.com>
Date: April 17, 2020 at 2:09:57 PM EDT
To: "azimmerman@kabbage.com" <azimmerman@Kabbage.com>, "sasher@kabbage.com"
<sasher@kabbage.com>
Subject: Confidential Employee Complaint
Good afternoon, Amy and Scott:
I am writing you to advise you of a number of issues I seek to bring to your attention. I would appreciate your urgent
review of the attached document.
I look forward to your response.
Regards,
Nicole
B000004
Case 25-52372-CTG Doc 117-2 Filed 06/09/26 Page 3 of 4
Dear Kabbage Human Resources and Legal:
This letter is to inform you of several concerns I have related to the working environment and treatment
I have been subject to during my 90+ day tenure at Kabbage. From the first day I joined the
organization, I have worked diligently to develop and execute a fraud strategy that mitigates economic
loss to the organization, reduces its risk profile, and provides greater security within our lending
environment. This is what I was hired to do.
During my first 30 days, I identified 5 separate fraud rings with losses totaling more than $10M.
Concurrently, I worked to develop a strategy, outline resource needs, including a training and action
plan to stop the fraud rings, and prevent recurrence. This proposal met great pushback. Controls it
called for were referred to as “stupid,” and would be cut off. Subsequently, I learned that the pushback
was a result of the desire to make money and not minimize losses.
After alerting leadership of more than $8M of previously unreported fraud losses, I was advised by two
senior leaders that “we do not have fraud,” and not to impair investors by classifying fraud. I raised
another concern related to hidden fraud losses, controls that were inappropriately integrated, and the
fact that my team was advised not to confirm fraud.
I have justifiably stated the need for additional fraud resources in the US and have been told no. I was
eventually provided one FTE and told to be grateful. At the same time, my non-minority counterparts
have received multiple resources to support originating Kabbage PPP Loans.
I have been disrespectfully cursed at by white males, in a very demeaning and belittling manner. I have
been told and pushed to “shut up” and “be quiet” about fraud needs, and repeatedly my thoughts were
called stupid by white males in the organization.
I was advised by several individuals to be very cautious around Spencer and David, due to their close
relationship with the owners.
On April 16th, in a conversation with Spencer Robinson, I was advised that I was no longer the Head of
Fraud. In that conversation, Spencer stated that I was “lucky I was not being fired, and that I was better
suited to in compliance to work under Azba with no clear direction of what that role will be”
A day prior to this conversation with Spencer (which was my first as a direct report of his), an urgent
meeting was scheduled with KK and Amit to share my fraud strategy with them. Little did I know that
the next day, I would be replaced by these two individuals, neither of which has any fraud experience.
Prior to reporting to Spencer, I received high praise from my previous leader (Vicky B), from Human
Resources, and several other functional leaders for the work my team and I have done. What’s more, I
have not been coached or received any constructive feedback regarding my performance or leadership.
Based upon this and other documented treatment I have been exposed to, the hostility of the working
environment, and other discriminatory actions I’ve had to endure due to my race and gender, I am
rendering this complaint. I have been discriminated upon, retaliated against, and experienced a hostile
B000005
Case 25-52372-CTG Doc 117-2 Filed 06/09/26 Page 4 of 4
work environment for my role in speaking up about employee related matters, fraud losses, and
reputational risk at Kabbage.
If you require any additional information or further details I am happy to discuss with you at your
earliest convenience.
Regards,
Nicole Hill
(NH)
B000006
Case 25-52372-CTG Doc 117-3 Filed 06/09/26 Page 1 of 20
EXHIBIT B
Case 25-52372-CTG Doc 117-3 Filed 06/09/26 Page 2 of 20
UNITED STATES OF AMERICA
ENTERPRISE BANK SECRECY ACT/ ANTI-MONEY LAUNDERING AND
OFFICE OF FOREIGN ASSETS CONTROL POLICY
Approval Date: [_____], 2020
Effective Date: [_____], 2020
B000007
Case 25-52372-CTG Doc 117-3 Filed 06/09/26 Page 3 of 20
Enterprise BSA/AML and OFAC Policy
Table of Contents
1. Introduction 3
A. Purpose 3
B. Responsibility and Training 4
C. Scope 4
D. Consequences of Non-Compliance 4
E. Key Terms 5
2. Policy Objectives 5
3. Governance, Organizational Structure, and Authority 6
A. BSA/AML Programs for Non-Regulated Institutions 6
B. Roles and Responsibilities 7
4. BSA/AML Policy Requirements 9
A. Designation of BSA/AML Officer and Governance Structure 10
B. Internal Controls 10
I. BSA/AML Risk Assessment 10
II. Know Your Customer Program 10
a. Customer Identification Program 11
b. Beneficial Ownership Requirements for Legal Entity Customers 11
c. Customer Due Diligence 12
d. High-Risk and Prohibited Customers 12
e. Enhanced Due Diligence for High-Risk Customers 13
III. OFAC Compliance and Name Screening 13
a. OFAC List Name Screening 14
b. USA Patriot Act Section 314A- Customer List Screening 14
IV. Transaction Monitoring 14
V. Referrals for Potentially Suspicious Activity 15
VI. Mechanisms to Monitor On-going Compliance 16
a. New Products Approval 16
b. Internal Control Monitoring 16
c. Board Reporting 16
d. Confidential Reporting of Violations 16
Confidential – BSA/AML Policy 1
B000008
Case 25-52372-CTG Doc 117-3 Filed 06/09/26 Page 4 of 20
Enterprise BSA/AML and OFAC Policy
VII. Additional BSA/AML Program Considerations 17
C. Training 17
D. Independent Testing 17
E. Risk-Based Controls 17
5. BSA/AML Policy Administration 18
A. Record Retention and Record Keeping 18
B. Version Control Management 18
Confidential – BSA/AML Policy 2
B000009
Case 25-52372-CTG Doc 117-3 Filed 06/09/26 Page 5 of 20
Enterprise BSA/AML and OFAC Policy
1. INTRODUCTION
A. PURPOSE
Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”), the Bank Secrecy Act (“BSA”), and Office of
Foreign Assets Control (“OFAC”) regulations each require compliance with applicable anti-money
laundering (“AML”) and sanctions regulations.
This document contains the Enterprise BSA/AML and OFAC Policy (the “Policy”) for complying with the
BSA and all other relevant statutes relating to money laundering, counter-terrorist financing, and
sanctions, 1 as implemented by Kabbage, Inc. and Kabbage Payments, LLC (collectively, “Kabbage” or the
“Company”) in connection with Kabbage’s role as:
(1) A program manager for Celtic Bank Corporation (“Celtic Bank”), the issuer of loans to small
and medium-sized businesses (“SMBs”) under the Kabbage FundingTM loan program;
(2) A payment facilitator enabling merchant processing services for SMBs through its
relationship with Worldpay, LLC (“Processor”) and Fifth Third Bank (“Sponsoring Bank”) for the
Kabbage PaymentsTM product;
(3) A technology service provider to Green Dot Bank (“Green Dot”), the issuer of demand
deposit accounts to SMBs for the Kabbage CheckingTM product; and
(3) A service provider to certain bank partners and independently as a non-bank lender
authorized by the U.S. Small Business Administration (“SBA”), in each case, for Paycheck
Protection Program loans offered pursuant to Section 1102 of the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act)(collectively with (1), (2), and (3), the “Offerings”). 2
The Policy sets out how the Offerings meet guidelines developed by regulators and other government
agencies to control, monitor, detect, prevent, and report possible money laundering, terrorist financing,
and other financial crimes and to screen, prohibit, reject, or block transactions for sanctions violations.
Accordingly, Kabbage’s BSA/AML program (“BSA/AML Program”) encompasses a Customer Identification
Program (“CIP”), including Know Your Customer/Know Your Business (collectively, “KYC”) checks,
transaction monitoring, suspicious activity reporting, and a comprehensive sanctions screening process.
To operationalize these elements of the BSA/AML Program, Kabbage has developed a separate
BSA/AML Program Manual (“BSA/AML Program Manual”). The BSA/AML Program Manual is a living
operational document and is periodically revised to reflect the Company’s operational procedures.
Kabbage, its management, and its Board of Directors (the “Board”) are committed to deterring use of
Offerings as a conduit for illegal activity. This Policy has been designed to provide the framework and
high level controls for effective compliance with BSA/AML and sanctions laws and regulations, as well as
to communicate a clear commitment to creating a strong compliance culture for the Company’s
1
Hereafter collectively referred to as “BSA/AML,” for simplicity.
2
The Paycheck Protection Program is a temporary Offering, made available by the SBA due to the unprecedented
economic circumstances resulting from COVID-19. Unless otherwise required by law and then only to such extent,
the Company’s BSA/AML obligations related to loans under the Paycheck Protection Program are likewise
temporary and conclude upon the maturity of such loans.
Confidential – BSA/AML Policy 3
B000010
Case 25-52372-CTG Doc 117-3 Filed 06/09/26 Page 6 of 20
Enterprise BSA/AML and OFAC Policy
employees. The separate BSA/AML Program Manual includes the detailed information related to the
specific requirements and procedures outlined in this Policy.
B. RESPONSIBILITY AND TRAINING
This Policy is established to govern the BSA/AML Program upon review and in certain cases, approval by
the Company’s bank partners and the Board and is reviewed annually by one or more qualified Kabbage
compliance professionals (“Compliance”) and the Chief Compliance Officer (“CCO”) to determine any
necessary updates resulting from changes in applicable laws, regulations or rules, industry landscape,
product offerings, and/or Kabbage or bank partner processes. In the event there are no material
changes to this Policy, Compliance will notify the Board, or a committee to which Board has delegated
authority for the Policy (“Board Committee”), that there are no material changes for consideration, in
lieu of providing the full Policy document to the Board. However, if there are material changes,
Compliance will provide the full policy document reflecting the recommended changes to the Board, or
appropriate Board Committee, for approval.
The BSA/AML Officer oversees and administers this Policy and may make recommendations of material
changes to the Policy. This responsibility may be transferred to a designated representative to the
extent deemed appropriate by the BSA/AML Officer.
Kabbage personnel will be trained on this Policy in accordance with the Compliance Training Policy.
No part of this Policy or its supporting procedures should be interpreted as contravening or superseding
other applicable legal and regulatory requirements imposed upon Kabbage or the Offerings. Any
conflicts between this Policy and Kabbage’s other applicable legal and regulatory requirements must be
submitted immediately to the BSA/AML Officer for further evaluation. If necessary, the BSA/AML Officer
will consult outside legal counsel.
Any exceptions to this Policy must be approved by the BSA/AML Officer. Questions or suggestions about
this Policy should be sent to the BSA/AML Officer, or designee.
C. SCOPE
This Policy applies to the Offerings and to all Kabbage personnel (i.e., management, Board members,
and employees) performing services related to the Offerings.
D. CONSEQUENCES OF NON-COMPLIANCE
All Kabbage personnel assigned to carry out any specific BSA/AML tasks are responsible for
understanding this Policy. Non-compliance with, or violation of, the Policy’s requirements may result in:
● Disciplinary action, up to and including termination in appropriate cases; and/or
● Individual and/or company civil and/or criminal penalties.
Willful blindness, or “turning a blind eye,” to a potential BSA/AML violation can expose Kabbage and its
bank partners to potential liability.
Confidential – BSA/AML Policy 4
B000011
Case 25-52372-CTG Doc 117-3 Filed 06/09/26 Page 7 of 20
Enterprise BSA/AML and OFAC Policy
E. KEY TERMS
Money laundering is generally defined as the process by which persons attempt to conceal and disguise
the true origin and ownership of illegal funds. Money laundering is generally viewed as a three-stage
process: placement, layering, and integration:
● Placement is the introduction of unlawful proceeds into the financial system without attracting
the attention of financial institutions or law enforcement;
● Layering is the movement of funds around the financial system to disguise their origin and
complicate the paper trail; and
● Integration is the incorporation of unlawful proceeds into the financial system to convert illicit
funds into apparently legitimate business earnings and acquire wealth.
Terrorist financing is generally defined as the process by which terrorists and/or terrorist organizations
raise funds through the abuse of financial products. While money laundering is the process by which
funds raised from criminal activities are made to look legitimate for re-integration into the financial
system, terrorist financing differs in that it typically concerns what the funds are to be used for, rather
than from where they come.
Sanctions are restrictions against doing business with individuals, entities, or countries. OFAC, as part of
the U.S. Department of the Treasury, is responsible for administering and enforcing economic and trade
sanctions based on U.S. Government requirements to support foreign policy and national security goals.
U.S. persons (a term that includes individuals and entities) are prohibited from engaging in most
transactions with these countries and certain individuals and entities (“Specifically Designated
Nationals” or “SDNs”). OFAC maintains an up-to-date list of SDNs (“SDN List”).
If a U.S. entity receives a payment from, or is asked to make a payment to, any SDN or restricted
country, for whatever purpose, the entity is required to stop the payment, block or reject the proceeds,
and report the transaction to OFAC within 10 business days.
2. POLICY OBJECTIVES
This Policy seeks to protect the Offerings from being used by individuals and entities engaging in money
laundering, terrorist financing, or sanctions avoidance. Specifically, the Policy:
● Defines specific roles and responsibilities for BSA/AML compliance;
● Creates an AML risk assessment process;
● Outlines the BSA/AML internal control process;
● Creates a KYC framework that provides for risk-based customer identification, verification, and
due diligence;
● Creates a risk-based transaction monitoring and suspicious activity referral and reporting
process;
● Establishes a policy of compliance with all USA PATRIOT Act Section 314(a) information sharing
requests by bank partners or by the Financial Crimes Enforcement Network (“FinCEN”);
● Establishes controls to ensure compliance with OFAC requirements;
Confidential – BSA/AML Policy 5
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● Establishes a process to ensure adherence to all applicable compliance requirements, including
filing of reports, responding to information requests, and maintaining records;
● Ensures Kabbage documents efforts to meet its legal and contractual obligations;
● Provides a training program for all personnel;
● Requires periodic compliance quality assurance and independent testing; and
● Requires regular reporting to management and the Board on Kabbage’s BSA/AML efforts.
3. GOVERNANCE, ORGANIZATIONAL STRUCTURE, AND AUTHORITY
Kabbage’s Board appoints the BSA/AML Officer, who is responsible for the execution of this Policy. The
BSA/AML Officer reports directly to the CCO, who is also appointed by the Board. Both the BSA/AML
Officer and the CCO have accountability and access to the Board, as needed.
The BSA/AML Officer is responsible for maintaining sufficient staffing, both in numbers and
qualifications, to implement this Policy effectively and for requesting additional resources from the
Board as needed. Notwithstanding the delegation of the day-to-day activities of BSA/AML compliance to
the BSA/AML Officer, the CCO, and the Board remain responsible for ensuring that adequate resources
are available for the BSA/AML Officer and for the BSA/AML Program.
Every employee of Kabbage has responsibility for ensuring that he or she implements the BSA/AML
Program within his or her sphere of responsibility. The BSA/AML Officer will receive advance notice of all
new products or services, as well as changes to existing products or services that might affect BSA/AML
risk of the Offerings.
All Kabbage personnel are directly accountable to the Company’s BSA/AML Officer for implementation
of this Policy and its associated procedures. The BSA/AML Officer and his/her team will have
unrestricted access to any business records, IT systems, or any other business locations to which they
require access in order to fulfil their responsibilities.
A. BSA/AML PROGRAMS FOR NON-REGULATED INSTITUTIONS
While Kabbage is not a “financial institution” (as defined in the BSA at 31 U.S. Code § 5312) required by
law to implement a BSA/AML program, Kabbage has made a commitment to implement an effective
BSA/AML program to comply with its statutory obligations under the Paycheck Protection Program as
well as its contractual obligations to its bank partners. This commitment is demonstrated through:
● Setting a clear “tone from the top” about the importance of BSA/AML compliance;
● Board and management’s ongoing involvement in oversight of the BSA/AML Program, including:
o Review and, where appropriate, approval of key documents such as the Policy and the
BSA/AML risk assessment;
o Receipt of regular management updates on the performance of the BSA/AML Program;
o Receipt of the results of the independent review of the BSA/AML Program;
o Resolution of escalated issues; and
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o Prompt corrective action to remediate systematic errors or control deficiencies.
Kabbage has also developed and implemented internal controls to ensure that it identifies inherent risks
within the organization, including those presented by customers, products and services, and
geographies.
As a U.S. company, Kabbage understands that it must comply with OFAC requirements. OFAC
requirements hold that all U.S. persons 3, including U.S. banks, bank holding companies, and non-bank
financial institutions, must comply with OFAC’s regulations. The laws and OFAC-issued regulations apply
not only to U.S. entities but also to their foreign branches and in certain circumstances, foreign
subsidiaries.
B. ROLES AND RESPONSIBILITIES
This BSA/AML Policy establishes the following roles and responsibilities:
Responsible Party Roles and Responsibilities
BSA/AML Officer The BSA/AML Officer owns this Policy and is responsible for:
(Policy Owner)
● Developing, implementing and maintaining this Policy’s related
procedures;
● Reviewing and refreshing the Policy at least annually, or when
circumstances warrant;
● Ensuring Kabbage personnel receive BSA/AML training, and that
Kabbage documents training materials and attendance records;
● Ensuring adequate BSA/AML staffing to implement the Policy;
● Providing guidance and direction to Kabbage personnel about the
steps they need to take to institute the Policy in their areas of
responsibility;
● Conducting an annual risk assessment;
● Ensuring the completion of an annual independent test of Kabbage’s
BSA/AML Program;
● Monitoring the effectiveness of BSA/AML compliance and taking
corrective action to remedy any deficiencies found;
● Reviewing any changes to BSA/AML-related laws, regulations,
guidance, or regulatory expectations and ensuring that Kabbage
implements processes to remain fully in compliance with its
BSA/AML obligations;
● Reviewing the BSA/AML implications of any new or changed
products, services, initiatives, or distribution channels, and advising
management and employees on necessary steps to mitigate
BSA/AML risk;
3
All U.S. persons must comply with OFAC regulations, including: all U.S. citizens and permanent resident aliens,
regardless of where they are located; all persons and entities within the United States; and all U.S. incorporated
entities and their foreign branches. In the case of certain programs, such as those regarding Cuba and North Korea,
foreign subsidiaries owned or controlled by U.S. companies also must comply. Certain programs also require
foreign persons in possession of U.S.-origin goods to comply.
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● Promptly alerting the Board to any material issues of BSA/AML non-
compliance, and instituting and monitoring corrective action;
● Providing annual reporting to the Board on the state of BSA/AML
compliance and any significant emerging issues;
● As needed, liaising with bank partners on BSA/AML issues; and
● Seeking outside legal advice on BSA/AML issues as required.
Board of Directors The Board, or a delegated committee thereof, is responsible for:
● Designating a BSA/AML Officer responsible for day-to-day oversight
of BSA/AML compliance at Kabbage;
● Reviewing and approving this Policy and any subsequent material
changes to this Policy;
● Reviewing Kabbage’s BSA/AML reporting, as appropriate;
● Reviewing the annual independent testing of the BSA/AML Program
and any plans for corrective action as necessary;
● Addressing any BSA/AML issues escalated to the Board; and
● As applicable, reviewing feedback from bank partners on the
BSA/AML Program and receiving reports on any remedial action
necessary.
Chief Compliance The CCO is responsible for:
Officer
● Promoting and implementing a strong culture of BSA/AML
compliance;
● Reviewing the BSA/AML risk assessment for the Offerings;
● Reviewing and approving this Policy and any subsequent material
changes to the Policy, prior to submitting to the Board for approval;
● Reviewing the BSA/AML Officer’s periodic reports;
● Holding personnel accountable for resolution of BSA/AML corrective
actions;
● Ensuring that Kabbage has adequate BSA/AML resources;
● Overseeing annual, or more frequent as necessary, compliance
quality assurance, independent control testing, and review of this
Policy and reporting results to the Board; and
● As applicable, reviewing feedback from bank partners relating to the
BSA/AML Program and receiving reports on any remedial action
necessary.
Kabbage Employees All employees of Kabbage with responsibilities impacting the BSA/AML
Program, are responsible for:
● Promoting a strong culture of BSA/AML compliance;
● Knowing their responsibilities under this Policy including the
prohibition on “tipping-off” (i.e., informing the subject of an
investigation or a suspicious activity filing of their status as a
subject), and ensuring they remain in compliance;
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● Implementing this Policy and its associated procedures within their
areas of responsibility, including designing, implementing and
maintaining necessary controls;
● Identifying BSA/AML compliance weaknesses and promptly alerting
and working with Kabbage’s BSA/AML Officer, or designee, to take
corrective action;
● Maintaining systems, controls, and reports used to support
compliance efforts;
● Notifying and seeking the approval of the BSA/AML Officer for any
new or modified products, services, initiatives, or distribution
channels;
● Reporting unusual activity to the CCO, BSA/AML Officer, or designee;
● Ensuring they complete required BSA/AML training; and
● Providing BSA/AML compliance personnel unrestricted access to any
business records, systems or locations necessary to fulfil the duties
described in this Policy and other applicable compliance policies and
procedures.
4. BSA/AML POLICY REQUIREMENTS
This Policy provides a summary of the various procedures and processes Kabbage employs to comply
with both legal requirements and its contractual responsibilities, to establish and maintain an effective
and compliant BSA/AML Program.
It describes the manner in which Kabbage implements the “five pillars” of AML compliance, namely:
A. Designation of a BSA/AML Officer and BSA governance structure;
B. Policies, procedures, and internal controls, which include:
I. A BSA/AML risk assessment process;
II. A risk-based KYC Program, which includes a CIP and customer due diligence (“CDD”);
III. OFAC screening, review, and reporting;
IV. Transaction monitoring;
V. Referring or reporting potentially suspicious activity to bank partners or FinCEN,
respectively;
VI. Mechanisms designed to monitor on-going compliance; and
VII. BSA/AML Program controls related to account opening.
C. On-going personnel training and development;
D. Independent testing of the BSA/AML Program; and
E. Risk-based procedures for conducting ongoing customer due diligence.
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A. DESIGNATION OF BSA/AML OFFICER AND GOVERNANCE STRUCTURE
Kabbage’s Board designates the BSA/AML Officer, who has responsibility for day-to-day oversight of
BSA/AML compliance for the Offerings. Section 3 describes the responsibilities of the BSA/AML Officer
and Kabbage’s BSA/AML governance structure.
B. INTERNAL CONTROLS
Kabbage has in place internal BSA/AML controls designed to mitigate risks presented by the Offerings.
Kabbage’s internal controls include those related to customer onboarding, transaction monitoring, and
sanctions screening functions.
I. BSA/AML RISK ASSESSMENT
The BSA/AML Officer conducts an annual risk assessment to identify the inherent BSA/AML and OFAC
risk of the Offerings and the effectiveness of the existing controls.
Consistent with the regulatory obligations of covered financial institutions, the risk assessment process
assigns an inherent risk rating based on an assessment of customers, product and services, and
geographic risks. The BSA/AML Officer then assesses the adequacy of the design and implementation of
mitigating controls to determine the residual risk. 4
The BSA/AML risk assessment process forms the foundation of the BSA/AML Program. Using the results
of the BSA/AML risk assessment, the BSA/AML Officer:
● Identifies the BSA/AML risk profile of the Offerings;
● Determines the adequacy and effectiveness of BSA/AML controls;
● Evaluates the adequacy and application of BSA/AML resources;
● Identifies the existence of any unmitigated and/or unacceptable BSA/AML risk; and
● If necessary, recommends and implements modifications to Kabbage’s activities and/or Policy
(or the underlying procedures and processes) to bring the BSA/AML residual risk of the Offerings
to an acceptable level.
The BSA/AML Officer reports the results of the BSA/AML risk assessment to the Board, including
proposed enhancements to the BSA/AML Program to mitigate any levels of excessive risk or control
weaknesses identified in the risk assessment, for review and approval. The BSA/AML Officer makes the
assessment available to other functions within the organization, including the business (also referred to
as the first line) and any product development functions.
II. KNOW YOUR CUSTOMER PROGRAM
The KYC program (the “KYC Program”) is a fundamental control in preventing the Offerings from
becoming involved in money laundering, terrorist financing, or sanctions violations. The KYC Program
covers all customers.
4
Refer to the BSA/AML Risk Assessment Methodology for additional details on this process.
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Customers include any business that (1) qualifies for a loan or a line of credit, (2) opens a merchant
account for processing card payments, or (3) opens a demand deposit account (collectively, “Account”).
Accounts are currently only available to domestic (U.S.) businesses.
The risk-based KYC processes for the Offerings encompass:
● A CIP that allows Kabbage to identify and verify the identity of customers with reasonable
assurance;
● A risk-based segmentation of customers; and
● A due diligence process that provides a greater depth of insight into certain customers.
Kabbage’s policy is to ensure that it has a reasonable belief that it knows the true identity of all
customers by collecting customer information at Account opening and collecting additional information,
if warranted, depending on customer behavior.
As part of its on-boarding processes, Kabbage is required to collect and verify the identity of its
customers and does so through non-documentary verification. Kabbage has engaged LexisNexis to
facilitate this function. Kabbage further uses online triangulation of disparate data sources connected
through its unique onboarding process to verify the identity of all customers. The vetting process for
new accounts also includes automated data validation, the use of third-party data services and, when
necessary, manual investigation.
In the event Kabbage is unable to form a reasonable belief that it knows the true identity of the
customer, Kabbage may take the following actions:
● Decline to open the Account;
● Impose terms under which a customer may use their Account while Kabbage attempts to verify
the customer’s identity; or
● Close or suspend an Account after attempts to verify a customer’s identity fail.
a. CUSTOMER IDENTIFICATION PROGRAM
For purposes of CIP regulation, all Accounts are considered to be accounts subject to CIP requirements.
Therefore, Kabbage performs CIP on all applicants for an Account. Kabbage collects CIP information (a)
at the time of onboarding, (b) at the time a customer initiates a change in his/her information on file,
and (c) on an ongoing basis thereafter using a risk-based approach. This process is designed to ensure
Kabbage is able to form a reasonable belief that it knows the true identity of each customer and is able
to mitigate the risk of identity theft, money laundering, terrorist financing, and sanctions violations.
b. BENEFICIAL OWNERSHIP REQUIREMENTS FOR LEGAL ENTITY CUSTOMERS
In accordance with FinCEN’s CDD requirements, Kabbage collects and verifies ultimate beneficial
ownership information of legal entity customers at the time a new Account is opened. Legal entity
customers include a corporation, limited liability company (LLC), or other entities that are created by a
filing of a public document with a Secretary of State or similar office, a general partnership, and any
similar business entity formed in the United States or a foreign country. Legal entity customers do not
include sole proprietorships or unincorporated associations. Customers that were Account holders prior
to the effective date of FinCEN’s CDD rule (May 11, 2018) are not subject to the beneficial ownership
verification requirements under the rule.
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Kabbage collects, at a minimum, the name, address, date of birth, and social security number (or
passport number or other similar information, in the case of foreign persons) for the following
individuals, each an ultimate beneficial owner (“UBO”), from the individual opening the Account on
behalf of a legal entity customer:
● each individual who, directly or indirectly, owns 25 percent 5 or more of the equity interests of
the legal entity customer (“Owner”); and
● an individual who has significant management responsibility for the legal entity customer
(“Control Person”)
Kabbage collects information for up to four Owners 6 and one Control Person. Kabbage further requires
the individual opening the Account on behalf of a legal entity customer to certify as to the accuracy of
the UBO information in a manner substantially similar to the Certification Form provided by FinCEN. 7
Kabbage uses a third-party to verify the UBO information and conducts enhanced due diligence as
necessary. All records related to the identification and verification of the UBOs are retained consistent
with this Policy.
c. CUSTOMER DUE DILIGENCE
The BSA/AML Program requires that CDD be performed on all customers. CDD may include: information
on business and industry type; information regarding payroll filings; corporate documents;
understanding of the purpose of the loan or transaction; and a Politically Exposed Person (“PEP”) check.
The BSA/AML Officer, or designee, will report or refer (as applicable) potentially suspicious activity if
Kabbage identifies such activity in the due diligence processes. 8
d. HIGH-RISK AND PROHIBITED CUSTOMERS
Kabbage has identified certain types of businesses that pose a higher risk and as a result, require
enhanced due diligence (“EDD”). These include:
● Confirmed PEPs or PEP-controlled entities; and
● Businesses that are risk rated as “High” through the Customer Risk Rating (“CRR”) methodology
process.
Kabbage has also identified certain types of businesses that pose significant risk and as a result, has
determined that they will not be accepted as customers:
● Businesses that are unable to link at least one account from a FinCEN registered money service
business (“MSB”) or financial institution; and
● Any business for which Kabbage has reported or referred for suspicious activity three times;
5
For Paycheck Protection Program loans, this threshold has been reduced to 20%.
6
For Paycheck Protection Program loans, information is collected for up to five Owners.
7
See Appendix A to 31 § CFR 1010.230 – Certification Regarding Beneficial Owners of Legal Entity Customers.
8
As a non-bank financing provider for Paycheck Protection Program loans, Kabbage will directly file suspicious
activity reports with FinCEN.
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● Businesses in the following industries: marijuana, CBD, gambling, financial services, lending,
non-profits; and businesses that sell or manufacture any form of assault-style weapons
and/or sell firearms or ammunition to individuals under 21;
● Businesses deemed as prohibited or requiring pre-approval for payment processing services by
the Processor;
● Businesses deemed as prohibited for demand deposit account services by Green Dot.
● With respect to Paycheck Protection Program loans, businesses that are deemed ineligible for
7(a) loans guaranteed by the U.S. Small Business Administration.
Kabbage does not offer access to consumer loans, demand deposit accounts, or payment processing
services for personal accounts and therefore, does not have any individual persons as customers.
e. ENHANCED DUE DILIGENCE FOR HIGH-RISK CUSTOMERS
Kabbage utilizes a risk-based methodology to conduct EDD.
Kabbage’s EDD process includes non-documentary means, documentary means, direct contact, and/or a
combination of the foregoing.
A customer risk rating is assigned at the time of onboarding for the purposes of determining the need
for EDD. Once EDD is successfully completed, the relevant documentation is added to the customer’s
profile but the risk level remains the same.
If after an assessment, it is determined that the Account or relationship may pose additional risks, the
Account or relationship will be escalated to the Risk team, and the BSA/AML Officer may be consulted,
to determine whether to open or maintain the Account or relationship.
III. OFAC COMPLIANCE AND NAME SCREENING
As a policy requirement, the BSA/AML Officer ensures that Kabbage complies with the OFAC
requirements to enforce economic and trade sanctions based on U.S. foreign policy and national
security goals. Kabbage’s policy towards OFAC compliance applies to all parties with which Kabbage
does business including, but not limited to customers, third-party vendors, and Kabbage personnel. The
systems and controls ensure that Kabbage:
● Fully incorporates OFAC risk within the BSA/AML risk assessment;
● Screens all customers, vendors, and personnel against the SDN List;
● Updates OFAC and other applicable lists in a timely fashion when sanctions programs and/or the
SDN List changes and screens existing customers, vendors, and personnel against changes to the
list on a recurring basis;
● Blocks internet protocol addresses of countries subject to comprehensive OFAC sanctions, and
any countries subject to narrower OFAC sanctions where the BSA/AML Officer or designee
deems that internet protocol blocking is necessary to mitigate the risk of a sanctions violation;
● Works with its bank partners to resolve any sanctions concerns;
● Prevents all customers under review for a potential OFAC hit from conducting transactions; 9 and
9
With regard to Kabbage Funding and Kabbage Checking, because the Account relationship is between the bank
and the business (i.e., Kabbage does not own the Account and therefore cannot block or maintain property),
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● Documents rationales for clearing all false-positive OFAC hits.
a. OFAC LIST NAME SCREENING
In order to conduct a timely and orderly screening of customers, Kabbage utilizes a third-party service
provider, which screens against OFAC and other sanctions lists to ensure adequate coverage and risk
mitigation for the OFAC screening process. Kabbage currently screens the following data elements:
● Name of business customer;
● Name of the business representative; and
● Name of the UBO(s).
For Offerings, names are screened:
● Prior to Account creation; and
● On a recurring monthly basis.
The Compliance Manager will immediately be advised of any OFAC screening matches and will work
with the BSA/AML Officer to document and communicate the match to bank partners. Where
appropriate, Kabbage will also report any confirmed true matches directly to OFAC and take the legally
mandated actions to manage the Account in accordance with OFAC requirements. Any true OFAC match
will also be reported to the Board and maintained as a record on a regular basis.
b. USA PATRIOT ACT SECTION 314A- CUSTOMER LIST SCREENING
Section 314(a) grants FinCEN the authority to require that each financial institution expeditiously search
its records to determine whether it maintains or has maintained any accounts for, or engaged in
specified transactions with, each individual entity or organization named in FinCEN’s request.
The BSA/AML Officer, or designee, is responsible for ensuring compliance with 314(a) information
sharing requests from bank partners and ensuring that such requests and responses stay confidential.
Upon receipt of a FinCEN 314(a) request from a bank partner, Kabbage, in compliance with the
requirement, will conduct a one-time search of the records related to the relevant Offering to identify
any current Account, or any Account maintained in the last twelve (12) months, for a named suspect.
Positive matches will be provided to the relevant bank partner prior to the designated response date
and Kabbage will retain all records in association with the review.
If, as a part of Kabbage’s status as an approved non-bank lender for Paycheck Protection Program loans,
Kabbage receives 314(a) requests directly from FinCEN, Kabbage will search Paycheck Protection
Program Account records in response directly to such request.
IV. TRANSACTION MONITORING
The BSA/AML Program has in place policies, procedures, and processes to identify and monitor unusual
activity, as well as a formal process for reviewing that activity, filing suspicious activity reports or
Kabbage does not have reporting requirements to OFAC related to blocked or rejected property. Kabbage would,
however, cease from enabling any further transactions on the Account.
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referrals suspicious activity to bank partners, and managing its systems used to assist in this process. In
addition, Kabbage requires all of its employees to report unusual or potentially suspicious activity to the
BSA/AML Officer or designee.
Since all transactions are conducted online and no currency (i.e., cash) is deposited, withdrawn,
exchanged, or transferred in connection with the Offerings, Kabbage does not have an obligation to file
currency transaction reports (“CTRs”).
V. REFERRALS FOR POTENTIALLY SUSPICIOUS ACTIVITY
Under federal law, a covered financial institution must file a Suspicious Activity Report (“SAR”) when it
identifies suspicious activities as part of the customer onboarding and monitoring processes. While
Kabbage is not a financial institution, in connection with its status as a non-bank lender for Paycheck
Protection Program loans, Kabbage will file SARs directly with FinCEN. Additionally, and consistent with
its contractual obligations, Kabbage will refer potentially suspicious activity to its bank partners.
Kabbage has implemented procedures for referring potentially suspicious activity to its bank partners 10
and maintains records for customer Account information (including the information obtained during the
customer vetting process) for the time period required by federal obligations.
The Risk team works closely with the Compliance and Financial Operations teams to identify and report
on any suspicious activities. Referrals and reports are submitted for any activity involving $5,000 11 or
more of funds or assets (individually or in the aggregate) once Kabbage knows, suspects, or has reason
to suspect the transaction:
● Involves funds derived from illegal activity or is intended or conducted in order to hide or
disguise funds or assets derived from illegal activity as part of a plan to violate or evade federal
law or regulation or to avoid any transaction reporting requirement under federal law or
regulation;
● Is designed, whether through structuring or otherwise, to evade any requirements of the BSA
regulations;
● Has no apparent lawful purpose or is not the business activity in which the customer would
normally be expected to engage, and Kabbage knows, after examining the background, possible
purpose of the transaction and other facts, of no reasonable explanation for the transaction;
and/or
● Involves the use of the Offerings to facilitate criminal activity.
Information collected by Kabbage regarding suspicious activity may not be discussed with anyone
outside the Kabbage organization (except for relevant bank partners). Discussion of such matters within
Kabbage should be limited to those who have a need to know. If an inquiry is received from the
10
Depending on the partner, such referrals may be labeled Questionable Activity Reports (“QARs”) or Unusual
Activity Reports (“UARs”).
11
Kabbage does not solely base its decision on whether to file or refer on whether the transaction is above a
predefined threshold. Transactions below $5,000 may also result in a report or referral if determined to be
warranted by the BSA/AML Officer.
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customer or an outside third party, the inquiry must be promptly referred to the BSA/AML Officer who
will consult with Kabbage’s CCO to determine the appropriate course of action.
The BSA/AML Officer, or designee, evaluates whether to close accounts subject to reports or referrals. If
an account is closed as a result, the BSA/AML Officer is responsible for documenting the basis for the
decision. Unless specifically instructed by law enforcement not to close the account, Kabbage will
consider the closure of any account on which it files three reports or referrals.
VI. MECHANISMS TO MONITOR ON-GOING COMPLIANCE
Kabbage has implemented additional mechanisms to monitor on-going compliance.
a. NEW PRODUCTS APPROVAL
All new or modified Offerings require approval by the BSA/AML Officer. Any launch decisions for new
products or services will appropriately consider AML risks and include plans for additional controls, as
needed.
Kabbage currently only provides the Offerings to domestic (U.S.) businesses. Any expansion of the
permitted customer base constitutes a new or modified business practice for these purposes.
b. INTERNAL CONTROL MONITORING
The BSA/AML Officer is responsible for developing monitoring processes to identify BSA/AML Program
systemic errors and control deficiencies promptly. These processes should facilitate remediation of
identified BSA/AML control deficiencies as well as escalation procedures. The BSA/AML Officer or
designee will then track the remediation of identified control deficiencies through corrective action
plans (e.g., based on recommendations identified by the risk assessment or independent testing). The
purpose of ongoing monitoring is to implement a quality control function to ensure day-to-day
compliance between full, and comprehensive, testing of the BSA/AML Program.
c. BOARD REPORTING
The BSA/AML Officer provides an annual report on the state of BSA/AML compliance and any significant
emerging issues that assists the Board and CCO in evaluating any Policy changes that may be
appropriate.
d. CONFIDENTIAL REPORTING OF VIOLATIONS
The BSA/AML Officer ensures Kabbage employees can report violations of this Policy anonymously by
telephone. The BSA/AML Officer further ensures that this mechanism is well publicized to all employees
and takes all possible steps to ensure reports of potential violations remain anonymous and
confidential. Kabbage never tolerates retaliation of any type against an employee who reports a
potential violation of the Policy. Any employee who commits such retaliation will be subject to
disciplinary action up to and including termination.
Internal referrals may not be discussed with anyone outside the organization. Discussion of such matters
within Kabbage should be limited to those who have a need to know. If an inquiry is received from the
customer or an outside third party, the inquiry must be promptly referred to the BSA/AML Officer, who
will consult with Kabbage’s CCO to determine the appropriate course of action.
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VII. ADDITIONAL BSA/AML PROGRAM CONSIDERATIONS
The process by which Kabbage assesses the BSA/AML risk of a prospective customer is in part
incorporated into the existing credit underwriting process for certain Offerings. Kabbage assesses the
credit risk of a customer using multiple sources, many of which may also serve as indicators of BSA/AML
Risk.
Customers are required to link an account from a U.S. financial institution (e.g., a regulated bank or a
money service business, such as PayPal), a process that assists underwriting, customer verification, and
loan disbursement.
C. TRAINING
Kabbage requires that all Kabbage personnel receive BSA/AML training appropriate to their roles and
responsibilities at least annually.
New Kabbage employees are required, within 30 days of hire, to participate in an orientation that
contains an overview of BSA/AML requirements.
The BSA/AML Officer is responsible for ensuring training is completed in a timely fashion. Kabbage
provides training on relevant laws and regulations, including BSA/AML requirements, through an online
course provided by a third-party. If deemed necessary by the BSA/AML Officer, additional in-depth
training may be provided either directly by the BSA/AML Officer or a third party.
D. INDEPENDENT TESTING
Kabbage’s BSA/AML Officer oversees the completion, at least annually, of an independent test of
Kabbage’s BSA/AML Program to assess the implementation and effectiveness of the BSA/AML Program
and the adequacy of its controls over BSA/AML compliance risk. 12
The BSA/AML Officer, or designee, is responsible for updating the risk assessment for the Offerings in
light of any issues raised during the independent testing and taking necessary corrective action to
remediate findings.
E. RISK-BASED CONTROLS
Kabbage has in place appropriate risk-based procedures for conducting ongoing customer due diligence
which include, but are not limited to:
● understanding the nature and purpose of the customer relationship for the purposes of
developing a customer risk profile; and
● conducting ongoing monitoring to identify and report suspicious activity and on a risk-basis, to
maintain and update customer information.
12
Celtic Bank is required to conduct an independent review of its BSA/AML program to assess the overall
effectiveness and institute practices for monitoring the strength of internal controls. As result, Celtic Bank expects
that Kabbage, as service provider to Celtic Bank, will also conduct an independent testing of the BSA/AML Program
on an annual basis.
Confidential – BSA/AML Policy 17
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Case 25-52372-CTG Doc 117-3 Filed 06/09/26 Page 20 of 20
Enterprise BSA/AML and OFAC Policy
Kabbage has implemented a CRR methodology for Offerings other than Paycheck Protection Program
loans 13 which assigns a risk-based rating to customers at the time of on-boarding using the following
factors:
● entity type;
● industry type;
● geographic location (e.g., in HIDTA or HIFCA); and
● marketing channel.
Customers with a high CRR rating are subject to EDD. Suspicious activity monitoring and reporting are
also critical internal controls and are addressed under Section 4(B)(IV). Kabbage periodically refreshes
both business and individual verification information to ensure it continues to maintain updated
customer information.
5. BSA/AML POLICY ADMINISTRATION
A. RECORD RETENTION AND RECORD KEEPING
Kabbage maintains all information related to BSA/AML requirements for a period of at least five (5)
years from the date of last activity on the Account. This includes but is not limited to: records of all
customer information including, CIP information, purpose of loan information, credit bureau file
information, documentary identification information, loan agreements, statements, transaction
information, customer correspondence, and customer contact information.
B. VERSION CONTROL MANAGEMENT
Bank Last
Last Board
Partner Reviewed
Ver. Revised Edited By Comments Approval
Approval Date
Date Date
Date
Celtic 4/6/18 3/23/18
Revised Policy per feedback from
1 3/28/18 A. Habib (3/28/18)
Promontory
● Expanded existing Policy to Celtic 7/24/19 7/11/19
contemplate payment processing (7/11/19)
services
2 7/11/19 A. Habib
● Addressed findings from 2018
BSA/AML audit
● Made clarifications and clean-ups
Expanded existing Policy to incorporate
3 4/24/19 A. Habib the Kabbage Checking and Kabbage
Paycheck Protection Program offerings
13
As of April, 2020, Kabbage is still refining its customer risk segmentation process for Paycheck Protection
Program loans and expects this process will likely be different from the standard CRR.
Confidential – BSA/AML Policy 18
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Case 25-52372-CTG Doc 117-4 Filed 06/09/26 Page 1 of 3
EXHIBIT C
Case 25-52372-CTG Doc 117-4 Filed 06/09/26 Page 2 of 3
B000026
Case 25-52372-CTG Doc 117-4 Filed 06/09/26 Page 3 of 3
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Case 25-52372-CTG Doc 117-5 Filed 06/09/26 Page 1 of 7
EXHIBIT D
Case 25-52372-CTG Doc 117-5 Filed 06/09/26 Page 2 of 7
August 11, 2020
Duff & Phelps, LLC
311 S. Wacker, Suite 4200
Chicago, IL 60606
Attention: Christopher L. Janssen
Dear Mr. Janssen:
In connection with your analysis and rendering of an Opinion (as defined in the engagement letter dated
August 5, 2020, the “Engagement Letter”) as to the solvency and capitalization of Kabbage, LLC (as
hereinafter defined) following the Proposed Transaction (as hereinafter defined), we hereby make to you the
representations presented in paragraphs numbered 1 to 8 as of the date hereof and as of the date of the
consummation of the Distribution. Kabbage, Inc., a Delaware corporation (together with its successors,
including Kabbage, LLC (as hereinafter defined), “Kabbage”), has engaged Duff & Phelps, LLC (“Duff &
Phelps”) to serve as an independent financial advisor to the board of directors (the “Board of Directors”) of
Alpha Kabbage, Inc., a Delaware corporation (“Alpha Kabbage” and, together with Kabbage, the
“Company”) (solely in their capacity as members of the Board of Directors) and to provide certain
determinations in connection with the Proposed Transaction, as defined below.
It is Duff & Phelps’ understanding that the Proposed Transaction involves a series of steps intended to
separate Kabbage’s lending and servicing platform (the “Alpha Assets”) from the Company’s existing loan
book to allow for the eventual sale to a third-party buyer (the “Buyer”) of the Alpha Assets (the “Alpha
Acquisition”). The first steps create Alpha Kabbage and effect a merger between Green Target Merger Sub,
LLC, a Delaware limited liability company (“Reorg Merger Sub”), and Kabbage (the “Reorg Merger”), with
the result of Alpha Kabbage becoming the sole stockholder of Kabbage.
Following the conversion of Kabbage to a Delaware limited liability company (“Kabbage, LLC”), Kabbage, LLC
will distribute the Alpha Assets to Alpha Kabbage (the “Distribution”). Kabbage, LLC will retain the existing
loan book and will service obligations under the existing loan book and any other assets, liabilities and
operations not acquired by the Buyer. After servicing those obligations, Kabbage, LLC will be eventually
wound down.
1. We have made available to you all significant information that we believe is relevant to your analysis,
including financial projections and budgets. The information we have provided includes accurate
historical financial and operating data and other information regarding Kabbage, LLC as of the date of
your analysis.
2. The assumptions provided and utilized in the projected cash flow calculations for Kabbage, LLC
represent management's best estimates as to the future operating performance and financial results of
B000028
Case 25-52372-CTG Doc 117-5 Filed 06/09/26 Page 3 of 7
Kabbage, LLC. The assumptions supporting such projections are both reasonable and achievable as of
the date hereof and have been subject to management and board review and approval.
3. We understand that there will usually be differences between prospective financial information and actual
results, and these differences may be material. Accordingly, to the extent that any of the information
used in the analysis requires adjustment, the resulting conclusion or your Opinion could be different.
4. We understand that distribution of your conclusions or your Opinion, which is to be distributed only in
its entirety, is intended for and restricted to the Company and the Board of Directors. Your conclusions
or your Opinion will not be discussed or disclosed by Company personnel with any other party for any
purpose without your prior express written approval. Neither your Opinion nor any reference to your
firm will be included or quoted in any offering or registration statement, proxy statement, prospectus,
sales brochure, appraisal, loan or other agreement or document without your prior express written
approval regarding both the form and substance of such disclosure. The Company agrees to obtain Duff
& Phelps’ written consent (not to be unreasonably withheld) before disclosing any of Duff & Phelps’
advice or analysis to anyone other than the Company’s legal counsel, or otherwise making reference to
its role, whether orally or in writing; provided, however, that Duff & Phelps hereby consents to the
Company (i) informing the stockholders of Alpha Kabbage and credit rating agencies of the existence of
the Opinion and that the Opinion was prepared by Duff & Phelps and (ii) delivering a non-reliance copy
of the Opinion to the Buyer upon the execution of a release agreement, executed by the Buyer, in a form
reasonably acceptable to Duff & Phelps. Other than as described in the preceding sentence, if Duff &
Phelps gives such written consent, the language of such disclosure it is subject to the prior written
approval of Duff & Phelps.
5. We understand that if there are any changes made to the facts, circumstances or underlying assumptions,
both as expressed in this management representation letter and in any other discussion with us, your
Opinion could change and this change may be material.
6. Based upon our review to date of your analysis and materials that you have provided, nothing has come
to our attention that would cause us to believe that the assumptions underlying your analyses are
unreasonable or unachievable given the prevailing facts and circumstances surrounding Kabbage, LLC
and the Proposed Transaction.
7. Exhibit A lists, to the best knowledge of the management of the Company, all contingent and unliquidated
liabilities and obligations that may require a cash payment by Kabbage, LLC. We acknowledge and
agree that any liabilities or obligations not listed on Exhibit A may change your analysis and opinion.
Further, we hereby represent that except as set forth on Exhibit A, (i) Kabbage, LLC has no other known
liabilities or obligations of any kind or nature whatsoever, contingent or otherwise, including, without
limitation, any liabilities or obligations with respect to (A) any credit, debit or charge card or similar
product or facility provided or offered by Kabbage, LLC or any of its affiliates and any agreement or
arrangement related thereto, or (B) any actions, causes of actions, litigation, claims, audits, examinations
or similar proceedings, and (ii) Kabbage, LLC has sufficient unencumbered and immediately available
cash to satisfy all of its operational and financial needs and requirements and to conduct the business and
B000029
Case 25-52372-CTG Doc 117-5 Filed 06/09/26 Page 4 of 7
operations of Kabbage, LLC in a manner consistent with the financial projections outlined in Exhibit B
following the consummation of the Distribution.
8. Exhibit B presents the financial projections of Kabbage, LLC for the six-year period following the
consummation of the Distribution.
Sincerely,
___________________________________________ August 14, 2020
Oneal Bhambani Date
Chief Financial Officer, Kabbage, Inc.
B000030
Case 25-52372-CTG Doc 117-5 Filed 06/09/26 Page 5 of 7
Exhibit A: Listing of Reserves
Description Reserve (3)
Mastercard Small Business Credit Co-Brand Agreement (1) $300,000
Potential Legal Liabilities $1,000,000
PPP Put Back $950,000
General Liquidity $100,000
Estimated Contractual Loan Servicing Obligations (2) $12,996,500
(1) Amount represents estimated launch support fees that would need to be reimbursed to MasterCard in
the event MasterCard terminates agreement.
(2) Amount projected by using revenue and cost assumptions for the SMB and PPP portfolios.
(3) For avoidance of doubt, amount represents reserved cash to fund liabilities, not an estimation of
liabilities.
B000031
Case 25-52372-CTG Doc 117-5 Filed 06/09/26 Page 6 of 7
Exhibit B: Financial Projections
Cash Burn Projections - Base Case
($ in thousands)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Current Projected Projected Projected Projected Projected Projected
Portfolio Outstanding (balances as of period end):
Number of KBG Active Accounts 28,112 4,180 1,483 559 177 15 -
Number of KBG Delinquent and Charged Off Accounts 11,294 1,831 495 209 70 8 0
Principal balance outstanding $471,657 $58,721 $23,259 $6,452 $1,268 $43 $0
PPP Accounts and Principle Balance Outstanding
Number of Accounts 219,074 14,449 11,147 11,147 11,147 11,147 11,147
Principal balance outstanding $5,557,726 $944,904 $529,471 $529,471 $529,471 $529,471 $529,471
Headcount (as of period end):
KBG 89 15 6 3 2 2 1
PPP 113 25 15 11 11 11 11
Corporate staff 3 3 3 3 3 2 2
Total 205 44 24 17 16 15 14
Cumulative Total
Year 1 - Year 6
KBG
Servicing Income (Warehouse / Forward Flow) $288 $237 $35 $13 $3 $0 $0
Resale of repurchased charge-offs (at $0.045) 717 657 40 15 4 1 0
Repurchase obligation - Forward Flow (Purchase of Charge-offs at $0.03) 478 438 26 10 3 1 0
Credit Operations Costs 3,316 2,234 468 241 155 141 78
KBG Net Contribution ($2,789) ($1,778) ($420) ($223) ($150) ($140) ($78)
PPP
Interest Income, net of financing charges $7,952 $5,294 $585 $539 $525 $511 $497
Customer Service Costs 9,489 4,816 1,290 1,117 756 756 756
PPP Net Contribution ($1,538) $478 ($705) ($577) ($230) ($244) ($258)
OPEX
Software & Services $4,076 $2,289 $520 $400 $327 $286 $254
Office, utilities and facilities 1,094 461 241 133 86 86 86
Other G&A 1,019 200 189 180 150 150 150
Corporate Operations (incl labor) 1,944 348 348 348 348 276 276
Total $8,133 $3,298 $1,298 $1,061 $912 $798 $766
Cash from unpledged loans $778 $681 $44 $37 $12 $3 $0
PPP Put Back $0 $0 $0 $0 $0 $0 $0
Cash Burn ($11,682) ($3,918) ($2,378) ($1,824) ($1,280) ($1,180) ($1,102)
Beginning Cash Balance $15,500 $15,500 $11,582 $9,204 $7,380 $6,100 $4,920
Ending Cash Balance $3,818 $11,582 $9,204 $7,380 $6,100 $4,920 $3,818
B000032
Case 25-52372-CTG Doc 117-5 Filed 06/09/26 Page 7 of 7
Cash Burn Projections - Sensitivity Case
($ in thousands)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Current Projected Projected Projected Projected Projected Projected
Portfolio Outstanding (balances as of period end):
Number of KBG Active Accounts 28,112 4,684 1,470 588 204 23 -
Number of KBG Delinquent and Charged Off Accounts 11,294 3,427 866 387 141 20 1
Principal balance outstanding $471,657 $71,791 $29,328 $8,692 $1,850 $79 $0
PPP Accounts and Principle Balance Outstanding
Number of Accounts 219,074 16,488 12,761 12,761 12,761 12,761 12,761
Principal balance outstanding $5,557,726 $1,231,675 $913,487 $913,487 $913,487 $913,487 $913,487
Headcount (as of period end):
KBG 89 23 7 4 3 2 1
PPP 113 28 22 16 16 16 16
Corporate staff 3 3 3 3 3 2 2
Total 205 54 32 23 22 20 19
Cumulative Total
Year 1 - Year 6
KBG
Servicing Income (Warehouse / Forward Flow) $274 $272 $3 $0 $0 $0 $0
Resale of repurchased charge-offs (at $0.045) 782 768 14 - - - -
Repurchase obligation - Forward Flow (Purchase of Charge-offs at $0.03) 521 512 9 - - - -
Credit Operations Costs 4,309 2,983 621 305 175 146 79
KBG Net Contribution ($3,774) ($2,456) ($614) ($305) ($175) ($146) ($79)
PPP
Interest Income, net of financing charges $9,807 $5,350 $960 $910 $886 $863 $839
Customer Service Costs 11,843 5,046 1,757 1,586 1,151 1,151 1,151
PPP Net Contribution ($2,036) $304 ($797) ($677) ($265) ($289) ($312)
OPEX
Software & Services $4,472 $2,428 $589 $458 $373 $329 $295
Office, utilities and facilities 1,076 441 242 133 87 87 87
Other G&A 1,605 283 272 263 263 263 263
Corporate Operations (incl labor) 1,865 335 335 335 335 263 263
Total $9,018 $3,487 $1,437 $1,189 $1,057 $941 $907
Cash from unpledged loans $730 $857 ($11) ($29) ($29) ($29) ($29)
PPP Put Back ($949) ($949) $0 $0 $0 $0 $0
Cash Burn ($15,046) ($5,731) ($2,859) ($2,200) ($1,526) ($1,404) ($1,327)
Beginning Cash Balance $15,500 $15,500 $9,769 $6,910 $4,711 $3,185 $1,780
Ending Cash Balance $454 $9,769 $6,910 $4,711 $3,185 $1,780 $454
B000033
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 1 of 24
EXHIBIT E
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 2 of 24
Confidential
October 15, 2020
Kabbage
Solvency Analysis Related to a Proposed Distribution
The information contained herein is of a confidential nature and is intended for the exclusive use of the persons or firm to whom it is furnished by us. B000034
Reproduction, publication, or dissemination of portions hereof may not be made without prior written approval of Duff & Phelps, LLC.
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 3 of 24
Duff & Phelps Disclaimer
• The following pages contain material that is being provided by Duff & Phelps, LLC (“Duff & Phelps” or “we”) to the Board of Directors (as defined herein)
(solely in their capacity as such) of the Company (as defined herein) as supporting analysis for an opinion that Duff & Phelps has been engaged to provide
to the Company and the Board of Directors in connection with a Proposed Transaction (as defined herein).
• The accompanying material was compiled and prepared on a confidential basis for the sole use of the Company and the Board of Directors in connection
with their consideration of the Proposed Transaction and not with a view toward public disclosure and may not be disclosed, summarized, reproduced,
disseminated or quoted from or otherwise referred to, in whole or in part, without the prior written consent of Duff & Phelps.
• Without limiting the prior bullet, because this material was prepared for use in the context of a presentation to the Company and the Board of Directors,
which are familiar with the business, assets, liabilities, prospects and affairs of the Company, neither the Company nor Duff & Phelps, nor any of their
respective legal or financial advisors or accountants, takes any responsibility for the accuracy or completeness of any of the material if used by persons
other than the Company and the Board of Directors.
• These materials are not intended to represent an opinion but rather to serve as discussion materials for the Company and the Board of Directors to review
and include information that may form a portion of a basis upon which Duff & Phelps may render an opinion. Any reference herein to an opinion or
discussions related thereto are qualified in their entirety by reference to any opinion actually rendered by Duff & Phelps in connection with the Proposed
Transaction.
• The information utilized in preparing this presentation was obtained from the Company and public sources. Duff & Phelps relied without independent
verification upon the accuracy, completeness, and fair presentation in all material respects of data, including all information contained in the Company’s
pro forma financial statements, and relied without independent verification on the accuracy of representations that Duff & Phelps obtained from public
sources, private sources and management of the Company. Any estimates and projections contained herein have been prepared by or based on
discussions with the senior management of the Company and involve numerous and significant subjective assumptions and determinations, which may or
may not prove to be correct. Projections necessarily involve risks and uncertainties. No representation or warranty, expressed or implied, is made as to
the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past or
the future. Duff & Phelps did not independently verify such information.
• Nothing contained herein should be construed as tax, legal, regulatory or accounting advice.
• As you are aware, the credit, financial and stock markets have been experiencing unusual volatility and economies and businesses have been impacted
and disrupted due to the COVID-19 pandemic and may be potentially impacted and disrupted in the future due to a resurgence of the COVID-19 pandemic
or “second wave” thereof. As such, and notwithstanding anything to the contrary herein or otherwise, we express no opinion or view, and have performed
no analysis, review or assessment, as to any potential effects of such volatility, impact or disruption on Kabbage, Inc. or the Proposed Transaction.
B000035
Confidential 2
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 4 of 24
Table of Contents
Section
1. Introduction and Background
2. Balance Sheet Analysis
3. Capital Adequacy / Cash Flow Analysis
Appendix
I. Original Base Case and Original Sensitivity Case
B000036
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Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 5 of 24
1. Introduction and Background
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Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 6 of 24
Introduction and Background
Engagement and Transaction Overview
The Engagement
• Kabbage, Inc., a Delaware corporation (together with its successors, including Kabbage, LLC (as defined below), “Kabbage” or “Kabbage, Inc.”), has
engaged Duff & Phelps, LLC (“Duff & Phelps”) to serve as an independent financial advisor to the board of directors (the “Board of Directors”) of Alpha
Kabbage, Inc., a Delaware corporation (“Alpha Kabbage” and, together with Kabbage, the “Company”) (solely in their capacity as members of the Board of
Directors) and to provide certain determinations (collectively, the “Opinion”) in connection with the Proposed Transaction, as defined below.
The Proposed Transaction
• It is Duff & Phelps’ understanding that the transaction involves a series of steps intended to separate Kabbage’s lending and servicing platform (the “Alpha
Assets”) from the Company’s existing loan book to allow for the eventual sale to a third-party buyer (the “Buyer”) of the Alpha Assets (the “Alpha
Acquisition”). The first steps created Alpha Kabbage and effected a merger between Green Target Merger Sub, LLC, a Delaware limited liability company
(“Reorg Merger Sub”), and Kabbage (the “Reorg Merger”), with the result of Alpha Kabbage becoming the sole stockholder of Kabbage.
• Following the conversion of Kabbage to a Delaware limited liability company (“Kabbage, LLC”), Kabbage, LLC distributed the Alpha Assets to Alpha
Kabbage (the “Distribution”). Kabbage, LLC then converted back to Kabbage, Inc. Kabbage, Inc. will retain the existing loan book and will service
obligations under the existing loan book and any other assets, liabilities and operations not acquired by the Buyer. After servicing those obligations,
Kabbage, Inc. will be eventually wound down.
B000038
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Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 7 of 24
Introduction and Background
Determinations
The Company has requested that Duff & Phelps determine whether, as of the date hereof and after giving effect to the consummation of the
transactions contemplated by Exhibit K to the Merger Agreement (as defined herein), including the Distribution:
1. Kabbage, Inc. should be able to pay its Debts (including Contingent Liabilities) as they become due;
2. Kabbage, Inc. will not have an unreasonably small amount of assets (or capital) for the businesses in which it is engaged or in which management has
indicated it intends to engage;
3. The Fair Value of the assets of Kabbage, Inc. exceeds the sum of (a) its Liabilities (including Contingent Liabilities) and (b) its capital (as such capital is
calculated pursuant to Section 154 of the Delaware General Corporation Law) (including the exclusion from such calculation of (a) Non-Recourse
Liabilities and (b) assets subject to Non-Recourse Liabilities, except to the extent that the Fair Value of such assets exceeds such Non-Recourse
Liabilities); and
4. Kabbage, Inc. will have sufficient cash on hand and working capital to service the Retained Loan Assets and to satisfy its obligations under any of its
retained Contracts or Liabilities to third-parties that are known by the Company or are reasonably likely to exist as of the closing date of the Proposed
Transaction, and the amount representing such sufficient cash on hand and working capital is equal to or greater than the Retained Cash (Retained
Loan Assets, Contracts, Liabilities, and Retained Cash are each as defined in the Merger Agreement, which is hereinafter defined).
This presentation contains a summary of our analysis and related observations with respect to the determinations described above, but does not
constitute an opinion with respect to these determinations. Any opinion as to these determinations would be subject to assumptions,
qualifications, other limitations, and other disclosures which are described in the Opinion letter and would be provided by Duff & Phelps in the
form of a signed opinion letter separately provided to the Board of Directors. Any capitalized terms used but not defined herein have the
respective meanings ascribed to them in the Opinion.
B000039
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Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 8 of 24
Introduction and Background
Scope of Analysis
In connection with the Opinion, Duff & Phelps has made such reviews, analyses and inquiries as it has deemed necessary and appropriate to render the Opinion. Duff & Phelps also took into
account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation, and with respect to similar transactions. Duff &
Phelps’ procedures, investigations, and financial analysis with respect to the preparation of the Opinion included, but were not limited to, the items summarized below:
• Reviewed the following documents:
– The audited financial statements for Kabbage for the year ended December 31, 2019 provided to us by management of the Company;
– Financial projections provided to us by management of the Company (the “Management Projections”);
– A letter dated October [ ], 2020 from the management of the Company which made certain representations as to historical financial statements, the Management Projections and the
underlying assumptions, and Contingent Liabilities for Kabbage on a post-transaction basis (the “Management Letter”);
– The Transfer, Assignment and Assumption Agreement dated as of October 13, 2020 by Kabbage, LLC and Alpha Kabbage (the “Transfer Agreement”);
– The Agreement and Plan of Merger among American Express Travel Related Services Company, Inc., Green Acquisition Merger Sub, Inc., Kabbage, Inc., Alpha Kabbage, Inc., and Fortis
Advisors, LLC, dated as of August 16, 2020 (as amended and in effect, the “Merger Agreement”); and
– Other files provided by the management of the Company including, but not limited to:
» i. KBRA Comments on Kabbage Asset Securitization LLC, Series 2019-1 Rapid Amortization Event (1).pdf
» ii. Kabbage - Board Presentation (7.29.20) v1.pdf
» iii. Kabbage Slide Deck (FTP).pptx
» iv. Kabbage - Small Business Credit Co-brand Agreement - 2020 - signed.pdf
» v. Marqeta Kabbage Program Addendum 10.6.15.pdf
» vi. ns.Kabbage_Visa Direct Incentive Agreement_Final watermarked 8 9 18.pdf
» vii. Project Green __ Servicing Transition Matters (3).DOCX
» viii. Proposal to Kabbage - PPP & KBG Loan Servicing.pdf
» ix. 6 - Loan Loss Reserve June 2020.xlsx
» x. B1 Credit Decision Process Overview.pdf
» xi. B2 B3 Historical Roll Rates by Delinquency Bucket.xlsb
» xii. B5 Houlihan Lokey Kabbage Draft (7.27.20).pdf
» xiii. D5 Forward Flow Charge Off Repurchase.xlsx
» xiv. Kabbage Servicing Model (8-9-2020) Base Case.xlsx
» xv. Kabbage Servicing Model (Stress Test - 8-9-2020).xlsx
» xvi. C1 Kabbage PPP Servicing Loan Tape 2020-06-30 (Update).xlsb
» xvii. C1 Kabbage SMB Servicing Loan Tape 2020-06-30 (Update).xlsb
» xviii. C3 Servicing Overview Aug 4 2020.pptx
» xix. K Servicing (10-10-2020).xlsx
» xx. SC1-#5273823-v11-Green_-_Transition_Services_Agreement_(TSA).DOCX
» xxi. SC1-#5300739-v3-Green_-_Transition_Services_Agreement_(TSA)_Schedules.DOCX
» xxii. Danny Eidson Offer Letter 2020 (1).docx
» xxiii. Please_DocuSign_Revised_-_Jon_Hoffman_Offer_.pdf
» xxv. Kabbage PPP Servicing Loan Tape 2020-09-30.xlsb
» xxvi. Kabbage SMB Servicing Loan Tape 2020-09-30.xlsb
» xxvii. Legacy Co BS - D&P.pdf
» xxviii. Correspondent Agreement 6.1 - 09.30.2020_KBG_clean (2) (1).docx
B000040
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Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 9 of 24
Introduction and Background
Scope of Analysis (continued)
• Discussed the information referred to above and the background and other elements of the Proposed Transaction with the management of the Company;
• Discussed with Company management its plans and intentions with respect to the management and operation of the business of Kabbage;
• Performed certain cash flow analyses using the Management Projections, which, based on management’s representations and with its consent, represent
a reasonable downside scenario; and
• Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.
B000041
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2. Balance Sheet Analysis
B000042
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 11 of 24
Balance Sheet Analysis
Conclusions
• Based on the Bringdown Sensitivity Case Management Projections:
– The net asset value of Kabbage, Inc. is at least $3.054 million; and
– The surplus of Kabbage, Inc. is at least $3.001 million.
Balance Sheet Test
($ in thousands)
Cash (1) $108,792.0
Fees receivable (SBA, Customers Bank) 2,539.0
Asset Value 111,331.0
Contractual servicing obligation (2) (16,485.0)
Payable to South State Bank per Correspondent Agreement (2,280.0)
Amounts due to PPP funding partners for returned loans (78,927.0)
Amounts reserved for return of SBA processing fees for returned loans (2,500.0)
Accrued vacation, paid time off, and sabbatical leave (2,409.0)
Accrued bonuses (3,308.0)
Other accrued expenses (1,131.0)
Payroll tax deferrals pursuant to the CARES Act (1,237.0)
Additional Contingent and Other Liabilities (3) 0.0
Net Asset Value - Kabbage, Inc. $3,054.0
Less: Stated Capital (4) (53.0)
Surplus $3,001.0
(1) As of October 13, 2020
(2) Based on the Bringdown Sensitivity Case, refer to page 16. Bringdown Sensitivity Case includes certain reserves
for potential liabilities including legal ($1.0mn), PPP-related ($0.95mn), Mastercard reimbursement ($0.3mn)
(3) Per Management representation; amounts represent reserves in addition to those included in footnote 2.
(4) Stated capital of $0.053mn as per 2019 audited financial statements of Kabbage, Inc.
B000043
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Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 12 of 24
Balance Sheet Analysis
Determinations and Methodology
Determination
• The Company has requested that Duff & Phelps determine whether, as of the date hereof and after giving effect to the consummation of the Distribution:
1. The Fair Value of the assets of Kabbage, Inc. exceeds the sum of (a) its Liabilities (including Contingent Liabilities) and (b) its capital (as such capital
is calculated pursuant to Section 154 of the Delaware General Corporation Law) (including the exclusion from such calculation of (a) Non-Recourse
Liabilities and (b) assets subject to Non-Recourse Liabilities, except to the extent that the Fair Value of such assets exceeds such Non-Recourse
Liabilities); and
2. Kabbage, Inc. will have sufficient cash on hand and working capital to service the Retained Loan Assets and to satisfy its obligations under any of its
retained Contracts or Liabilities to third-parties that are known by the Company or are reasonably likely to exist as of the closing date of the Proposed
Transaction, and the amount representing such sufficient cash on hand and working capital is equal to or greater than the Retained Cash (Retained
Loan Assets, Contracts, Liabilities, and Retained Cash are each as defined in the Merger Agreement, which is hereinafter defined).
Methodology
• Duff & Phelps estimated the cumulative service obligations under the existing loan book utilizing the Bringdown Sensitivity Case of the Management
Projections (refer to page 16), and deducted liabilities and the undiscounted cumulative service obligations from balance sheet cash to estimate the net
asset value for Kabbage, Inc.
B000044
Confidential 11
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 13 of 24
3. Capital Adequacy / Cash Flow Analysis
B000045
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 14 of 24
Capital Adequacy / Cash Flow Analysis
Determinations and Methodology
Determination
• The Company has requested that Duff & Phelps determine whether, as of the date hereof and after giving effect to the consummation of the Distribution:
1. Kabbage, Inc. should be able to pay its Debts (including Contingent Liabilities) as they become due; and
2. Kabbage, Inc. will not have an unreasonably small amount of assets (or capital) for the businesses in which it is engaged or in which management has
indicated it intends to engage.
Methodology
• Performed a detailed analysis of cash flow projections based on the Bringdown Sensitivity Case Management Projections to assess the ability to service
obligations under the existing loan book.
B000046
Confidential 13
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 15 of 24
Cash Flow / Capital Adequacy Analysis
Portfolio Stratifications
Total Portfolio
($ in thousands)
Program Count* Outstanding Principal* % of Total Maturity Date** Term (Months)** Interest Rate (APR)** 30-59 Days Past Due** 60-89 Days Past Due** 90+ Days Past Due**
PPP 258,339 $6,107,884 93.89% 8/9/2023 38.16 1.00% N/A N/A N/A
Pledged Non-EPP 52,818 $283,577 4.36% 1/12/2021 11.92 40.94% 3.75% 4.34% 30.62%
Pledged EPP 21,244 $112,307 1.73% 7/2/2020 9.99 42.93% 2.73% 2.45% 8.46%
Not Pledged Non-EPP 4,781 $941 0.01% 4/9/2021 14.31 41.02% 12.68% 4.09% 32.87%
Not Pledged EPP 1,785 $309 0.00% 3/17/2020 8.34 48.72% 0.71% 5.04% 6.33%
Total 338,967 $6,505,017 100.00% 6/9/2023 36.52 3.47% 3.48% 3.81% 24.34%
PPP
($ in thousands)
Loan Balance Count* Outstanding Principal* % of Total Maturity Date** Term (Months)** Interest Rate**
<=$150 K 253,420 $4,470,463 73.19% 10/9/2023 40.01 1.00%
>$150 K 4,919 $1,637,420 26.81% 2/22/2023 33.09 1.00%
Total 258,339 $6,107,884 100.00% 8/9/2023 38.16 1.00%
Direct vs. Non-Direct Count* Outstanding Principal* % of Total Maturity Date** Term (Months)** Interest Rate**
Direct 98,769 $1,475,747 54.30% 4/30/2024 46.26 1.00%
Non-Direct 159,570 $1,241,983 45.70% 12/5/2022 30.60 1.00%
Total 258,339 $2,717,730 100.00% 8/9/2023 38.16 1.00%
SMB
($ in thousands)
EPP Status Count Outstanding Principal* % of Total Maturity Date** Term (Months)** Interest Rate (APR)** 30-59 Days Past Due** 60-89 Days Past Due** 90+ Days Past Due**
Non-EPP 57,599 $284,518 71.64% 1/12/2021 11.93 40.94% 3.78% 4.34% 30.63%
EPP 23,029 $112,616 28.36% 7/2/2020 9.99 42.95% 2.73% 2.46% 8.46%
Total 80,628 $397,134 100.00% 11/18/2020 11.38 41.51% 3.48% 3.81% 24.34%
*Balances displayed in thousands based on the provided filename “Kabbage SMB Servicing Loan Tape 2020-09-30.xlsb”. PPP balances and counts based
upon filename “K Servicing Model (10-10-2020).xlsx”.
**Indicates a metric displayed as a weighted average.
B000047
Confidential 14
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 16 of 24
Cash Flow / Capital Adequacy Analysis
Bringdown Sensitivity Case - Key Assumptions Reviewed
Duff & Phelps reviewed the Bringdown Sensitivity Case Management Projections as the basis for the cash flow analysis. Key assumptions include:
PPP Bringdown Sensitivity Case – Key Assumptions
– Management has utilized the same forgiveness scheduled for loans above $150,000 and below $150,000 in the Original Sensitivity Case.
– Management has maintained the same percentage of loans projected to be “put-back” as a result of improper document review, or as a result of a change to the SBA’s
view on “Safe Harbor” in the Original Sensitivity Case.
– Per the Shared Services Agreement, Management has elected to outsource certain Customer Servicing responsibilities to American Express employees for
approximately six months.
– Management has projected a faster wind down of headcount in late 2021 as compared to mid 2023 in the Original Sensitivity Case.
– Management has updated accounts and balances with known information from July and August, with approximately 39,000 more accounts than in the Original Sensitivity
Case.
SMB Bringdown Sensitivity Case – Key Assumptions
– Management utilized the same roll rates that were utilized in the Original Sensitivity Case and continued to use contractual paydown percentages to forecast balance,
delinquency migration, and account number run-offs.
– Management’s assumptions for contractual repurchase charge-off obligation fee and resale of repurchased charge-offs remained the same as those utilized in the
Original Sensitivity Case.
– Management decreased the contractual assumption for the warehouse servicing fees from 3% to 1%. This is a negotiating tactic that they have considered but not yet
executed. It is a conservative estimate to assume that they will.
– Management updated accounts and balances with known information from July and August. Both accounts and balances have amortized faster than was previously
projected in the Original Sensitivity Case.
– Management assumed an additional $999,788 in expenses related to potential additional hiring for selected servicing functions as needed.
B000048
Confidential 15
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 17 of 24
Servicing Model
Bringdown Sensitivity Case Summary
Cash Burn Projections - Bringdown Sensitivity Case
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
As of 9/30/2020
Projected Projected Projected Projected Projected Projected
Portfolio Outstanding (balances as of period end):
KBG Active Accounts 21,701 1,714 451 96 22 1 -
KBG Delinquent and Charged Off Accounts 10,869 1,624 326 77 17 2 -
Principal balance outstanding ($MMs) 394,539 41,281 10,024 1,568 209 4 -
PPP Accounts and Volumes
Accounts 258,339 19,526 14,604 14,604 14,604 14,604 14,604
Volumes ($Ms) 6,108 1,283 943 943 943 943 943
Headcount (as of period end):
KBG 75 10 2 1 1 1 1
PPP 116 17 11 11 11 11 11
Corporate staff (Inc. Amex employees) 23 24 15 13 12 12 11
Total 213 51 28 25 23 23 22
Cumulative Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Year 1 - Year 6 Projected Projected Projected Projected Projected Projected
KBG
Servicing Income (Warehouse / Forward Flow) 158 130 23 5 1 0 0
Resale of repurchased charge-offs (at $0.045) 680 594 66 17 3 0 0
Repurchase obligation - Forward Flow 453 (396) (44) (11) (2) (0) (0)
Credit Operations Costs (Inc. Third Party Expenses) 3,230 (2,221) (392) (180) (151) (144) (143)
KBG Net Contribution (2,846) (1,894) (347) (170) (149) (144) (143)
PPP
Interest Income, net of financing charges 11,294 6,437 1,048 991 965 939 914
Customer Service Costs 4,057 1,795 512 437 437 437 437
PPP Net Contribution 7,237 4,641 536 553 528 502 476
Bringdown Related Expenses
Shared Personnel (5,168) (1,329) (1,015) (870) (749) (603) (603)
Training (13) (13) - - - - -
Platform (4,690) (2,295) (907) (649) (347) (264) (228)
OPEX
Software & Services 4,222 2,405 487 353 335 325 317
Office, utilities and facilities 91 39 13 11 10 9 9
Other G&A 2,254 1,285 390 174 144 130 130
Corporate Operations (incl labor) 4,466 1,117 1,044 1,029 498 498 280
Total 11,033 4,846 1,934 1,567 987 963 737
Cash from unpledged loans (Inc. Miscellaneous Credits) 1,086 1,054 24 7 0 0 0
PPP Put Back (1,058) (1,058) 0 0 0 0 0
Cash Burn (16,485) (5,739) (3,643) (2,694) (1,705) (1,472) (1,233)
Beginning Cash Balance 17,000 17,000 11,261 7,618 4,924 3,220 1,748
Ending Cash Balance 515 11,261 7,618 4,924 3,220 1,748 515
Note: Beginning cash balance excludes fees receivable from SBA and Customers Bank of $2.5mn
B000049
Confidential 16
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 18 of 24
Servicing Model
Bringdown Sensitivity Case Summary (Compared against the Original Sensitivity Case)
Sensitivity Analysis - Bringdown Sensitivity Case vs. Original Sensitivity Case
($ in thousands)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Projected Projected Projected Projected Projected Projected
Number KBG Active Accounts Year 1 - Year 6
Cumulative Variance
Original Sensitivity Case 4,684 1,470 588 204 23 -
Bringdown Sensitivity Case 1,714 451 96 22 1 - -67.2%
Number KBG Delinquent and Charged Off Accounts Year 1 - Year 6
Cumulative Variance
Original Sensitivity Case 3,427 866 387 141 20 1
Bringdown Sensitivity Case 1,624 326 77 17 2 - -57.8%
Number of PPP Accounts Year 1 - Year 6
Cumulative Variance
Original Sensitivity Case 16,488 12,761 12,761 12,761 12,761 12,761
Bringdown Sensitivity Case 19,526 14,604 14,604 14,604 14,604 14,604 15.3%
KBG Net Contribution Year 1 - Year 6
Cumulative Variance
Original Sensitivity Case (2,456) (614) (305) (175) (146) (79)
Bringdown Sensitivity Case (1,894) (347) (170) (149) (144) (143) $929
PPP Net Contribution Year 1 - Year 6
Cumulative Variance
Original Sensitivity Case 304 (797) (677) (265) (289) (312)
Bringdown Sensitivity Case 4,641 536 553 528 502 476 $9,273
Total Opex Year 1 - Year 6
Cumulative Variance
Original Sensitivity Case 3,487 1,437 1,189 1,057 941 907
Bringdown Sensitivity Case 4,846 1,934 1,567 987 963 737 $2,015
Bringdown Related Expenses Year 1 - Year 6
Cumulative Variance
Original Sensitivity Case - - - - - -
Bringdown Sensitivity Case (3,637) (1,923) (1,518) (1,096) (867) (830) ($9,871)
Cash Burn Year 1 - Year 6
Cumulative Variance
Original Sensitivity Case (5,731) (2,859) (2,200) (1,526) (1,404) (1,327)
Bringdown Sensitivity Case (5,739) (3,643) (2,694) (1,705) (1,472) (1,233) ($1,439)
B000050
Confidential 17
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 19 of 24
Appendix I Original Base Case and Original
Sensitivity Case
B000051
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 20 of 24
Cash Flow / Capital Adequacy Analysis
Original Base Case - Key Assumptions Reviewed
Duff & Phelps reviewed the Management Projections as the basis for the original base case cash flow analysis (the “Original Base Case”). Key assumptions
include:
General
– A run-off of the current business under which Kabbage, Inc. stops issuing new loans, generating origination fees, and generating servicing fees.
– Management assumed the same amortization speeds for both outstanding balances and accounts.
– Management assumed no collection of late fees.
– Management assumptions for operating costs, including, among other things, Customer Service, Risk, Technology Support, Collections, and
Compliance Costs implied the average servicing cost per loan as follows:1
1 Management is in the process of negotiating a shared services agreement with Alpha Kabbage. Based on the current form of the agreement,
Management has represented that the costs are expected to be lower than in the Original Base Case assumptions.
B000052
Confidential 19
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 21 of 24
Cash Flow / Capital Adequacy Analysis
Original Base Case - Key Assumptions Reviewed (continued)
PPP Key Assumptions
– A wind-down of operating costs based primarily upon the expected run-off of loans outstanding (due primarily from SBA forgiveness & guarantees):
• “Blanket Forgiveness” available for loans under $150,000, which Management based upon review of current versions of the proposed HEALS Act.
• 97% - 98% (depending on cohort) of the loans below $150,000 are gradually forgiven over an 11-month period after the 6-month deferral period;
• 75% of the loans above $150,000 are forgiven by the 7th month after the 6-month deferral period.
– Management has assumed that lenders will be able to shield themselves from any liability relying on the SBA's 'good faith' clauses with respect to actions it took
reviewing borrower documents when originating and servicing loans.
– Management assumed net interest will be accrued monthly on the outstanding balance at an annualized rate of 0.65% (1% interest income less 0.35% PPPLF interest
expense) until the balance is forgiven. Unforgiven amounts are assumed to continue to accrue interest until the loans mature.
– Responses to SBA Loan Reviews requesting documents on loans can be executed on an automated basis with very low cost.
– Management assumed financing of unpaid PPP interest ahead of repayment from the SBA at a financing rate of 5-year Treasuries plus 75 basis points.
SMB Key Assumptions
– Management utilized roll rates and contractual paydown percentages to forecast balance, delinquency migration, and account number run-offs.
– Management applied contractual assumptions for servicing fees (3% for the warehouse and 1% for the forward flow).
– Management applied a contractual repurchase charge-off obligation fee of 3% of par for forward flow.
– Management assumed a resale of repurchased charge-offs of 4.5%.1
1 Management has estimated that recent collections on charge-offs are approximately 5% to 6%.
B000053
Confidential 20
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 22 of 24
Cash Flow / Capital Adequacy Analysis
Original Base Case Summary
Cash Burn Projections - Original Base Case
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
As of 9/30/2020
Projected Projected Projected Projected Projected Projected
Portfolio Outstanding (balances as of period end):
KBG Active Accounts 28,112 4,180 1,483 559 177 15 -
KBG Delinquent and Charged Off Accounts 11,294 1,831 495 209 70 8 0
Principal balance outstanding ($MMs) 471,657 58,721 23,259 6,452 1,268 43 -
PPP Accounts and Volumes
Accounts 219,074 14,449 11,147 11,147 11,147 11,147 11,147
Volumes ($Ms) 5,558 945 529 529 529 529 529
Headcount (as of period end):
KBG 89 15 6 3 2 2 1
PPP 113 25 15 11 11 11 11
Corporate staff 3 3 3 3 3 2 2
Total 205 44 24 17 16 15 14
Cumulative Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Year 1 - Year 6 Projected Projected Projected Projected Projected Projected
KBG
Servicing Income (Warehouse / Forward Flow) 288 237 35 13 3 0 0
Resale of repurchased charge-offs (at $0.045) 717 657 40 15 4 1 0
Repurchase obligation - Forward Flow 478 438 26 10 3 1 0
Credit Operations Costs 3,316 2,234 468 241 155 141 78
KBG Net Contribution (2,789) (1,778) (420) (223) (150) (140) (78)
PPP
Interest Income, net of financing charges 7,952 5,294 585 539 525 511 497
Customer Service Costs 9,489 4,816 1,290 1,117 756 756 756
PPP Net Contribution (1,538) 478 (705) (577) (230) (244) (258)
OPEX
Software & Services 4,076 2,289 520 400 327 286 254
Office, utilities and facilities 1,094 461 241 133 86 86 86
Other G&A 1,019 200 189 180 150 150 150
Corporate Operations (incl labor) 1,944 348 348 348 348 276 276
Total 8,133 3,298 1,298 1,061 912 798 766
Cash from unpledged loans 778 681 44 37 12 3 0
PPP Put Back 0 0 0 0 0 0 0
Cash Burn (11,682) (3,918) (2,378) (1,824) (1,280) (1,180) (1,102)
Beginning Cash Balance 17,000 17,000 13,082 10,704 8,880 7,600 6,420
Ending Cash Balance 5,318 13,082 10,704 8,880 7,600 6,420 5,318
B000054
Confidential 21
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 23 of 24
Cash Flow / Capital Adequacy Analysis
Original Sensitivity Case - Key Assumptions Reviewed
The sensitivity analysis supplements our analysis of the Original Base Case projections in determining whether Kabbage, LLC passes the capital adequacy and
cash flow solvency tests. The sensitivity analysis (the “Original Sensitivity Case”) is designed to illustrate Management’s reasonable downside scenario
projections. Key assumptions include:
PPP Original Sensitivity Case – Key Assumptions
– A faster amortization speed was applied to the outstanding balance than the amortization speed applied to the number of accounts, whereas the Original
Base Case assumed the same amortization speed for both the outstanding balance and the number of accounts.
– A certain percentage of loans are projected to be “put-back” as a result of improper document review, or as a result of a change to the SBA’s view on
“Safe Harbor”, compared to 0% in the Original Base Case.
– Higher Compliance/Legal costs were applied in preparation for future responses to document requests from the SBA pertaining to loan reviews.
– A more conservative forgiveness assumption of approximately 95.9% was applied for loans below $150,000, compared to a forgiveness assumption of
97.5% in the Original Base Case, as the threshold might change in the future.
– A stress was performed on the total costs for unforgiven loans in the tail after all forgiveness benefits are applied.
– Management assumed financing of unpaid PPP interest ahead of repayment from the SBA at a financing rate of 5-year Treasuries plus 75 basis points.
SMB Original Sensitivity Case – Key Assumptions
– In consideration of the potential for a COVID-19 second wave and/or a prolonged period where businesses are unable to operate at full capacity,
Management stressed roll rates to reflect the increased default experience observed in Q2 2020.
B000055
Confidential 22
Case 25-52372-CTG Doc 117-6 Filed 06/09/26 Page 24 of 24
Cash Flow / Capital Adequacy Analysis
Original Sensitivity Case Summary
Cash Burn Projections - Original Sensitivity Case
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
As of 9/30/2020
Projected Projected Projected Projected Projected Projected
Portfolio Outstanding (balances as of period end):
KBG Active Accounts 29,644 4,684 1,470 588 204 23 -
KBG Delinquent and Charged Off Accounts 12,750 3,427 866 387 141 20 1
Principal balance outstanding ($MMs) 463,207 71,791 29,328 8,692 1,850 79 -
PPP Accounts and Volumes
Accounts 219,030 16,488 12,761 12,761 12,761 12,761 12,761
Volumes ($Ms) 5,558 1,232 913 913 913 913 913
Headcount (as of period end):
KBG 94 23 7 4 3 2 1
PPP 113 28 22 16 16 16 16
Corporate staff 3 3 3 3 3 2 2
Total 210 54 32 23 22 20 19
Cumulative Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Year 1 - Year 6 Projected Projected Projected Projected Projected Projected
KBG
Servicing Income (Warehouse / Forward Flow) 274 272 3 - - - -
Resale of repurchased charge-offs (at $0.045) 782 768 14 - - - -
Repurchase obligation - Forward Flow 521 512 9 - - - -
Credit Operations Costs 4,309 2,983 621 305 175 146 79
KBG Net Contribution (3,774) (2,456) (614) (305) (175) (146) (79)
PPP
Interest Income, net of financing charges 9,807 5,350 960 910 886 863 839
Customer Service Costs 11,843 5,046 1,757 1,586 1,151 1,151 1,151
PPP Net Contribution (2,036) 304 (797) (677) (265) (289) (312)
OPEX
Software & Services 4,472 2,428 589 458 373 329 295
Office, utilities and facilities 1,076 441 242 133 87 87 87
Other G&A 1,605 283 272 263 263 263 263
Corporate Operations (incl labor) 1,865 335 335 335 335 263 263
Total 9,018 3,487 1,437 1,189 1,057 941 907
Cash from unpledged loans 730 857 (11) (29) (29) (29) (29)
PPP Put Back (949) (949) 0 0 0 0 0
Cash Burn (15,046) (5,731) (2,859) (2,200) (1,526) (1,404) (1,327)
Beginning Cash Balance 17,000 17,000 11,269 8,410 6,211 4,685 3,280
Ending Cash Balance 1,954 11,269 8,410 6,211 4,685 3,280 1,954
B000056
Confidential 23
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 1 of 19
EXHIBIT G
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 2 of 19
Debtor: Kabbage, Inc. d/b/a KServicing
UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE
Case Number: 22-10951
FILED
Claim No. 247
April 03, 2023
By Omni Claims Agent
Official Form 410 For U.S. Bankruptcy Court
Proof of Claim District of Delaware
04/22
Read
Read the instructions before
the instructions filling out
before filling form. This
this form.
out this Thisform
formis
isfor
formaking
makingaaclaim forpayment
claimfor paymentin
inaabankruptcy
bankruptcycase.
case. Do
Donot
notuse
usethis
thisform
formtotomake a
make a request for payment of an administrative expense. Make such a request according to 11 U.S.C. § 503.
request for payment of an administrative expense. Make such a request according to 11 U.S.C. § 503.
Filers must leave out or redact information that is entitled to privacy on this form or on any attached documents. Attach redacted copies of any
Filers musthat
documents leave out or
support redact
the information
claim, such as that is entitled
promissory notes,to privacy
purchaseon this form
orders, or on any
invoices, attached
itemized documents.
statements of running redacted copies
Attachaccounts, of any
contracts, documents
judgments,
that supportand
mortgages, the security
claim, such as promissory
agreements. notes,
Do not sendpurchase
originalorders, invoices,
documents; itemized
they may be running
destroyedofafter
statements accounts,
scanning. If thecontracts,
documents judgments, mortgages, and
are not available,
securityinagreements.
explain Do not send original documents; they may be destroyed after scanning. If the documents are not available, explain in an attachment.
an attachment.
A
A person
person who
who files
files aa fraudulent
fraudulent claim
claim could
could be
be fined
fined up
up to
to $500,000,
$500,000, imprisoned for up
imprisoned for up to
to 5
5 years,
years, or
or both. 18U.S.C.
both. 18 U.S.C.§§
§§152,
152,157,
157,and
and3571.
3571.
Fill in all the information about the claim as of the date the case was filed. That date is on the notice of bankruptcy (Form 309) that you received.
Fill in all the information about the claim as of the date the case was filed. That date is on the notice of bankruptcy (Form 309) that you received.
Carefully read instructions included with this Proof of Claim before completing.
Part 1: Identify the Claim
1. Who is the current creditor? United States of America
Name of the current creditor (the person or entity to be paid for this claim)
Other names the creditor used with the debtor
2. Has this claim been acquired X No
from someone else? Yes From whom?
3. Where should notices and Where should notices to the creditor be sent? Where should payments to the creditor be sent? (if
payments to the creditor be different)
sent?
United States Attorney's Office, EDTX
Federal Rule of Name Name
110 N. College Avenue, Suite 700
Bankruptcy Procedure
(FRBP) 2002(g)
Number Street Number Street
Tyler, TX 75702
City State ZIP Code City State ZIP Code
Contact Phone 903-510-9370 Contact Phone
Betty.Young@usdoj.gov
Contact email Contact email
Uniform claim identifier for electronic payments in chapter 13 (if you use one)
4. Does this claim amend one X No
already filed? Yes Claim Number on court claims registry (if known) Filed On
MM / DD / YYYY
5. Do you know if anyone else
has filed a proof of claim for X No
this claim? Yes Who made the earlier filing?
Official Form 410 Proof of Claim B000187
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 3 of 19
Part 2: Give Information About the Claim as of the Date the Case Was Filed
6. Do you have any number you
use to identify the debtor?
X No
Yes Last 4 digits of the debtor's account or any number you use to identify the debtor:
7. How much is the claim? $ $346,157,724.00 Does this amount include interest or other charges?
X No
Yes Attach statement itemizing interest, fees, expenses, or other
charges required by Bankruptcy Rule 3001(c)(2)(A).
8. What is the basis of the Examples: Goods sold, money loaned, lease, services performed, personal injury or wrongful death, or credit card.
claim?
Attach redacted copies of any documents supporting the claim required by Bankruptcy Rule 3001(c).
Limit disclosing information that is entitled to privacy, such as health care information
Violation of 31 U.S.C. 3729 (see Attachment).
9. Is all or part of the claim X No
secured? Yes The claim is secured by a lien on property
Nature of property:
Real Estate If the claim is secured by the debtor's principal residence, file a Mortgage Proof of Claim
Attachment (Official Form 410-A) with this Proof of Claim
Motor Vehicle
Other Describe:
Basis for perfection:
Attach redacted copies of documents, if any, that show evidence of perfection of a security interest (for example,
a mortgage, lien, certificate of title, financing statement, or other document that shows the lien has been filed or
recorded.
Value of Property: $
Amount of the claim that is secured: $
Amount of the claim that is unsecured: $ (The sum of the secured and
unsecured amounts should match the
amount in line 7).
Amount necessary to cure any default as of the date of the petition: $
Annual Interest Rate: (when case was filed) ____________%
X Fixed
Variable
10. Is this claim based on a X No
lease? Yes Amount necessary to cure any default as of the date of the petition. $
11. Is this claim subject to a No
right of setoff? X Yes Identify the property: Funds, if any, held by any federal agency.
12. Is this claim for the value X No
of goods received by the Yes Amount of 503(b)(9) Claim: $
debtor within 20 days
before the
commencement date of
this case
(11 U.S.C. § 503(b)(9)).?
Official Form 410 Proof of Claim B000188
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 4 of 19
13. Is all or part of the claim X No
entitled to priority under Amount entitled to priority
Yes Check one:
11 U.S.C. § 507(a)?
Domestic support obligations (including alimony and child support) under
11 U.S.C. § 507(a)(1)(A) or (a)(1)(B). $
A claim may be partly
priority and partly
Up to $3,350* of deposits toward purchase, lease, or rental of property or services
nonpriority. For example,
for personal, family, or household use. 11 U.S.C. § 507(a)(7).
in some categories, the $
law limits the amount
Wages, salaries, or commissions (up to $15,150*) earned within 180 days before
entitled to priority.
the bankruptcy petition is filed or the debtor's business ends, whichever is earlier. $
11 U.S.C. § 507(a)(4).
Taxes or penalties owed to governmental units. 11 U.S.C. § 507(a)(8). $
Contributions to an employee benefit plan 11 U.S.C. § 507(a)(5). $
Other. Specify subsection of 11 U.S.C. § 507(a)(___) that applies. $
* Amounts are subject to adjustment on 4/01/25 and every 3 years after that for cases begun on or after the date of adjustment.
Part 3: Sign Below
The person completing Check the appropriate box:
this proof of claim must
I am the creditor.
sign and date it.
FRBP 9011(b). X I am the creditor's attorney or authorized agent.
I am the trustee, or the debtor, or their authorized agent. Bankruptcy Rule 3004.
If you file this claim
electronically, FRBP I am the guarantor, surety, endorser, or other codebtor. Bankruptcy Rule 3005.
5005(a)(2) authorizes
courts to establish local I understand that an authorized signature on this Proof of Claim serves as an acknowlegment that when calculating the
rules specifying what a
signature is. amount of the claim, the creditor gave the debtor credit for any payments received toward the debt.
I have examined the information in this Proof of Claim and have a reasonable belief that the information is true
A person who files a and correct.
fraudulent claim could be
fined up to $500,000, I declare under penalty of perjury that the foregoing is true and correct.
imprisoned for up to 5
years, or both.
18 U.S.C. §§ 152, 157, and Executed on date 4/3/2023
3571. MM / DD / YYYY
Betty Young
Signature
Print the name of the person who is completing and signing this claim:
Name Betty Young
First Name Middle Name Last Name
Title Assistant U.S. Attorney
Company United States Attorney's Office, Eastern District of Texas
Identify the corporate servicer as the company if the authorized agent is a servicer.
110 N. College Avenue, Suite 700
Address
Number Street
Tyler, TX 75702
City State ZIP Code
Betty.Young@usdoj.gov
Contact Phone 903-510-9370 Email
Official Form 410 Proof of Claim B000189
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 5 of 19
Fill in this information to identify the case:
Debtor 1 Kabbage, Inc. d/b/a KServicing et al.
__________________________________________________________________
Debtor 2 ________________________________________________________________
(Spouse, if filing)
__________
United States Bankruptcy Court for the: District District of __________
of Delaware
Case number 22-10951 (CTG)
___________________________________________
Official Form 410
Proof of Claim
Read the instructions before filling out this form. This form is for making a claim for payment in a bankruptcy case. Do not use this form to
make a request for payment of an administrative expense. Make such a request according to 11 U.S.C. § 503.
Filers must leave out or redact information that is entitled to privacy on this form or on any attached documents. Attach redacted copies of any
documents that support the claim, such as promissory notes, purchase orders, invoices, itemized statements of running accounts, contracts, judgments,
mortgages, and security agreements. Do not send original documents; they may be destroyed after scanning. If the documents are not available,
explain in an attachment.
A person who files a fraudulent claim could be fined up to $500,000, imprisoned for up to 5 years, or both. 18 U.S.C. §§ 152, 157, and 3571.
Fill in all the information about the claim as of the date the case was filed. That date is on the notice of bankruptcy (Form 309) that you received.
Part 1: Identify the Claim
1. Who is the current
creditor?
United States of America
___________________________________________________________________________________________________________
Name of the current creditor (the person or entity to be paid for this claim)
Other names the creditor used with the debtor ________________________________________________________________________
2. Has this claim been ✔ No
acquired from
someone else? Yes. From whom? ______________________________________________________________________________________________________
3. Where should notices Where should notices to the creditor be sent? Where should payments to the creditor be sent? (if
and payments to the different)
creditor be sent?
United States Attorney's Office, EDTX
_____________________________________________________ _____________________________________________________
Federal Rule of Name Name
Bankruptcy Procedure
(FRBP) 2002(g) 110 N. College Avenue, Suite 700
______________________________________________________ ______________________________________________________
Number Street Number Street
Tyler TX 75702
______________________________________________________ ______________________________________________________
City State ZIP Code City State ZIP Code
Contact phone 903-510-9370
________________________ Contact phone ________________________
Contact email Betty.Young@usdoj.gov
________________________ Contact email ________________________
Uniform claim identifier for electronic payments in chapter 13 (if you use one):
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
4. Does this claim amend ✔ No
one already filed?
Yes. Claim number on court claims registry (if known) ________ Filed on ________________________
MM / DD / YYYY
5. Do you know if anyone ✔ No
else has filed a proof Yes. Who made the earlier filing? _____________________________
of claim for this claim?
Official Form 410 Proof of Claim B000190
page 1
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 6 of 19
Part 2: Give Information About the Claim as of the Date the Case Was Filed
6. Do you have any number ✔ No
you use to identify the Yes. Last 4 digits of the debtor’s account or any number you use to identify the debtor: ____ ____ ____ ____
debtor?
7. How much is the claim? 346,157,724.00 Does this amount include interest or other charges?
$_____________________________.
✔ No
Yes. Attach statement itemizing interest, fees, expenses, or other
charges required by Bankruptcy Rule 3001(c)(2)(A).
8. What is the basis of the Examples: Goods sold, money loaned, lease, services performed, personal injury or wrongful death, or credit card.
claim?
Attach redacted copies of any documents supporting the claim required by Bankruptcy Rule 3001(c).
Limit disclosing information that is entitled to privacy, such as health care information.
Violations of 31 U.S.C. 3729 (see Attachment).
______________________________________________________________________________
9. Is all or part of the claim ✔ No
secured? Yes. The claim is secured by a lien on property.
Nature of property:
Real estate. If the claim is secured by the debtor’s principal residence, file a Mortgage Proof of Claim
Attachment (Official Form 410-A) with this Proof of Claim.
Motor vehicle
Other. Describe: _____________________________________________________________
Basis for perfection: _____________________________________________________________
Attach redacted copies of documents, if any, that show evidence of perfection of a security interest (for
example, a mortgage, lien, certificate of title, financing statement, or other document that shows the lien has
been filed or recorded.)
Value of property: $__________________
Amount of the claim that is secured: $__________________
Amount of the claim that is unsecured: $__________________ (The sum of the secured and unsecured
amounts should match the amount in line 7.)
Amount necessary to cure any default as of the date of the petition: $____________________
Annual Interest Rate (when case was filed)_______%
Fixed
Variable
10. Is this claim based on a ✔ No
lease?
Yes. Amount necessary to cure any default as of the date of the petition. $____________________
11. Is this claim subject to a No
right of setoff?
✔ Yes. Identify the property: Funds,
if any, held by any federal agency.
___________________________________________________________________
B000191
Official Form 410 Proof of Claim page 2
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 7 of 19
12. Is all or part of the claim ✔ No
entitled to priority under
11 U.S.C. § 507(a)? Yes. Check one: Amount entitled to priority
A claim may be partly Domestic support obligations (including alimony and child support) under
priority and partly 11 U.S.C. § 507(a)(1)(A) or (a)(1)(B). $____________________
nonpriority. For example,
in some categories, the Up to $* of deposits toward purchase, lease, or rental of property or services for
law limits the amount personal, family, or household use. 11 U.S.C. § 507(a)(7). $____________________
entitled to priority.
Wages, salaries, or commissions (up to $1,*) earned within 180 days before the
bankruptcy petition is filed or the debtor’s business ends, whichever is earlier. $____________________
11 U.S.C. § 507(a)(4).
Taxes or penalties owed to governmental units. 11 U.S.C. § 507(a)(8). $____________________
Contributions to an employee benefit plan. 11 U.S.C. § 507(a)(5). $____________________
Other. Specify subsection of 11 U.S.C. § 507(a)(__) that applies. $____________________
* Amounts are subject to adjustment on 4/01/ and every 3 years after that for cases begun on or after the date of adjustment.
Part 3: Sign Below
The person completing Check the appropriate box:
this proof of claim must
sign and date it. I am the creditor.
FRBP 9011(b). ✔ I am the creditor’s attorney or authorized agent.
If you file this claim I am the trustee, or the debtor, or their authorized agent. Bankruptcy Rule 3004.
electronically, FRBP
5005(a)(2) authorizes courts
I am a guarantor, surety, endorser, or other codebtor. Bankruptcy Rule 3005.
to establish local rules
specifying what a signature
is. I understand that an authorized signature on this Proof of Claim serves as an acknowledgment that when calculating the
amount of the claim, the creditor gave the debtor credit for any payments received toward the debt.
A person who files a
fraudulent claim could be I have examined the information in this Proof of Claim and have a reasonable belief that the information is true
fined up to $500,000, and correct.
imprisoned for up to 5
years, or both.
I declare under penalty of perjury that the foregoing is true and correct.
18 U.S.C. §§ 152, 157, and
3571.
Executed on date
04/03/2023
_________________
MM / DD / YYYY
________________________________________________________________________
Signature
Print the name of the person who is completing and signing this claim:
Name Betty S. Young
_______________________________________________________________________________________________
First name Middle name Last name
Title Assistant U.S. Attorney
_______________________________________________________________________________________________
Company United States Attorney's Office, Eastern District of Texas
_______________________________________________________________________________________________
Identify the corporate servicer as the company if the authorized agent is a servicer.
Address 110 N. College Avenue, Suite 700
_______________________________________________________________________________________________
Number Street
Tyler TX 75702
_______________________________________________________________________________________________
City State ZIP Code
Contact phone 903-510-9370
_____________________________ Email Betty.Young@usdoj.gov
____________________________________
B000192
Official Form 410 Proof of Claim page 3
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 8 of 19
Attachment to Proof of Claim Form of the United States of America in In re Kabbage, Inc.
d/b/a KServicing, et al. (Bankr. Case No. 22-10951 (CTG))
1. The United States of America on behalf of the United States Department of Justice,
Civil Division, and the United States Attorney’s Office for the Eastern District of Texas
(collectively, “United States”), submits this proof of claim (“Proof of Claim”) as to Kabbage, Inc.
d/b/a KServicing (“Kabbage” or “Debtor”).
I. SUMMARY OF CLAIM
2. The United States is investigating credible allegations that Kabbage violated the
False Claims Act (“FCA”), 31 U.S.C. §§ 3279–3733, when it submitted or caused to be submitted
to the U.S. Small Business Administration (“SBA”) false certifications regarding its compliance
with the SBA’s rules and regulations implementing the Paycheck Protection Program (“PPP”).
Among other requirements, the PPP required lenders, to which the SBA delegated authority to
approve PPP loans, to comply with the Bank Secrecy Act (“BSA”) and the anti-money laundering
(“AML”) fraud controls. The United States is investigating allegations that because of Kabbage’s
failure to implement adequate fraud controls sufficient to comply with the PPP requirements,
including BSA/AML requirements, Kabbage knowingly submitted or caused the submission to the
SBA of false claims for processing fees, forgiveness payments, and guarantee payments related to
the fraudulent loans that it approved.
3. To date, the Government’s investigation shows that both as a direct PPP lender and
lender service provider for its partner banks, Kabbage knew it did not implement adequate fraud
controls sufficient to comply with the PPP requirements, including BSA/AML requirements,
during its participation in the PPP, and knew and/or had reason to know that it was submitting
fraudulent and ineligible PPP loan applications to the SBA. Yet Kabbage repeatedly certified to
the SBA its compliance with the applicable PPP regulations and submitted or caused the
submission of false claims for processing fees and forgiveness and guarantee payments from the
SBA despite its noncompliance.
4. Specifically, the Government’s investigation to date indicates Kabbage falsely
certified that it had (1) confirmed receipt of information demonstrating that borrowers had
employees for whom the borrower paid salaries and payroll taxes, (2) confirmed the receipt of
legitimate payroll documentation supplied by the borrower to conduct its review to confirm the
dollar amount of average monthly payroll costs for the preceding calendar year, (3) complied with
BSA/AML regulations by verifying PPP borrower identities, and (4) implemented a due diligence
program with sufficient fraud checks. In fact, Kabbage knowingly set substandard fraud check
thresholds, reduced its fraud staff, told its staff to submit to the SBA highly suspicious PPP loans
even when its staff had identified those loans as fraudulent or highly suspicious, placed a ten-
percent limit on document review for each batch of loans released to the SBA, and encouraged
employees to increase PPP loan application pass rates to increase revenue.
5. As a result of Kabbage’s false certifications, the Government disbursed millions of
dollars in PPP loan processing fees and forgiveness and guarantee payments to Kabbage and to
fraudsters who received PPP loans and loan forgiveness.
B000193
Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 9 of 19
The Qui Tam Lawsuit
6. On February 5, 2021, a qui tam lawsuit was filed under seal pursuant to the FCA,
31 U.S.C. §§ 3729–3733, in the United States District Court for the Eastern District of Texas. The
district court recently granted the United States a partial lift of this seal to the extent necessary for
the United States to file this Proof of Claim. Accordingly, the qui tam complaint itself is not being
disclosed at this time. In sum, the qui tam Complaint alleges that Kabbage knowingly submitted
or caused the submission to the SBA of false claims for processing fees, forgiveness payments,
and guarantee payments related to the fraudulent PPP loans that it approved.
A. Nature and Basis of the Claim.
The False Claims Act
7. The FCA is the United States’ primary tool for fighting fraud. The FCA provides,
in pertinent part, that any person who: “(A) knowingly presents, or causes to be presented, a false
or fraudulent claim for payment or approval; [or] (B) knowingly makes, uses, or causes to be made
or used, a false record or statement material to a false or fraudulent claim . . . is liable to the United
States Government for a civil penalty of not less than $5,000 and not more than $10,000, as
adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 . . . plus 3 times the
amount of damages which the Government sustains because of the act of that person.” 31 U.S.C.
§ 3729(a)(1).
8. For purposes of the FCA, the term “knowingly” means that a person, with respect
to information: (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the
truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the
information. No proof of specific intent to defraud is required. 31 U.S.C. § 3729(b)(1).
9. For purposes of the FCA, the term “claim,” as relevant here, means a request or
demand for payment from the United States. 31 U.S.C. § 3729(b)(2).
10. For purposes of the FCA, the term “material” means “having a natural tendency to
influence, or be capable of influencing, the payment or receipt of money or property.” 31 U.S.C.
§ 3729(b)(4). Loan certifications to government entities are material. E.g., United States v.
Eghbal, 548 F.3d 1281, 1284–85 (9th Cir. 2008); United States v. Wells Fargo Bank, N.A., 972 F.
Supp. 2d 593, 625 (S.D.N.Y. 2013); United States v. Americus Mortg. Corp., No. 4:12-CV-02676,
2014 WL 4274279, at *11 (S.D. Tex. Aug. 29, 2014).
The CARES Act and the PPP
11. Congress created the PPP under section 7(a) of the Small Business Act as part of
the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Pub. L. No. 116-136
(Mar. 27, 2020). The PPP, which is administered through the SBA, provided emergency relief to
2
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Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 10 of 19
small and medium-sized businesses affected by the COVID-19 pandemic. See 15 U.S.C.
§ 636(a)(36).
12. Under the PPP, the SBA did not make PPP loans directly. Rather, the CARES Act
delegated authority to private lenders, such as Kabbage, to make the PPP loans pursuant to PPP
requirements. The program permitted borrowers to apply for loan forgiveness if they complied
with requirements for the use of funds they received. The SBA also guaranteed unforgiven or
defaulted loan amounts for lenders as long as those lenders adhered to program requirements. To
receive forgiveness or guarantee payments, lenders submitted claims and certifications to the SBA,
and the SBA disbursed payments to lenders.
13. Congress authorized the SBA to pay a processing fee to the lender for each eligible
loan. See 15 U.S.C. § 636(a)(36)(P). The processing fee was calculated as a percentage of the
loan amount. See id. In December 2020, the Economic Aid to Hard-Hit Small Businesses,
Nonprofits, and Venues Act, Pub. L. No. 116–260, 134 Stat. 1993 (Dec. 27, 2020), amended the
PPP to provide that fees may be required to be repaid if “the lender is found guilty of an act of
fraud in connection with the covered loan.” 15 U.S.C. § 636(a)(36)(P)(iii).
Applicable PPP Lender Requirements
14. To participate in the PPP, a non-bank lender that is not already an approved 7(a)
Lender with a valid SBA Form 750 or 750CA must submit to SBA Form 3507, wherein it attested
that it would “assume all obligations, responsibilities, and requirements associated with delegated
processing of covered loans made under the Paycheck Protection Program;” that it was
“responsible, to the extent set forth in the PPP Loan Program Requirements, for all decisions
concerning the eligibility (including size) of a borrower for a covered loan;” and that it would
“certif[y] that it is in compliance and will maintain compliance with all applicable requirements of
the Paycheck Protection Program and PPP Loan Program Requirements.”
15. PPP lenders were required to: (a) confirm receipt of borrower certifications, (b)
confirm receipt of borrower information demonstrating that a borrower had employees for whom
the borrower paid salaries and payroll taxes, and (c) confirm, by performance of a good faith
review, the dollar amount of average monthly payroll costs for the preceding calendar year by
reviewing payroll documentation submitted with the borrower’s application. See 85 Fed. Reg.
20811, 20815 (Apr. 15, 2020). “Lenders are expected to perform a good faith review, in a
reasonable time, of the borrower’s calculations and supporting documents concerning average
monthly payroll cost.” SBA PPP FAQ #1 (Apr. 3, 2020).
16. As the PPP was established under section 7(a) of the Small Business Act, PPP
lenders were required to conform with the overall requirements of the Act to the extent they did
not conflict with PPP program requirements. 85 Fed. Reg. 20811, 20815.
17. PPP lenders were also required to follow the applicable BSA/AML requirements.
85 Fed. Reg. 20811, 20815. Non-bank lenders were expected to establish an “AML compliance
program equivalent to that of a comparable federally regulated institution” before making PPP
loans. Id. Such regulations require institutions to have (and utilize) a written Customer
3
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Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 11 of 19
Identification Program (“CIP”), that was part of an anti-money laundering compliance program,
which includes procedures for: (1) specifying what identifying information will be obtained from
the customer and verifying the identity of the customer using that information; (2) making and
maintaining a record of customer identification information; (3) determining whether the customer
appears on government lists of known or suspected terrorists or terrorist organizations; and (4)
providing customers with notice that information to verify customer identity is requested. See 31
C.F.R. § 1020.220(a)(1)–(5). AML regulations also require institutions to (1) have and apply a
due diligence program “designed to enable” the detection and reporting of “known or suspected
money laundering activity” connected to both correspondent accounts and private banking
accounts; and (2) maintain procedures for risk assessment of accounts. See 31 C.F.R.
§§ 1010.610(a), 1010.620(a); see also 31 C.F.R. § 1020.210(a)(1). Federally regulated institutions
must also report suspicious activity for transactions involving or aggregating at least $5,000 in
funds where the institution knows, suspects, or has reason to suspect that the transaction involves
funds derived from illegal activities or is designed to evade BSA regulations or other federal law.
See 31 C.F.R. § 1020.320.
18. After the lender processed and approved a borrower’s PPP loan application, but
prior to the closing of the PPP loan, the PPP required lenders to submit SBA Form 2484, applying
for a guarantee on the loan. SBA Form 2484 required lenders to certify to the SBA that the lender
had complied with paragraphs 3.b(i)-(iii) of the April 15 Interim Final Rule, which provide that:
Each lender shall:
i. Confirm receipt of borrower certifications contained in Paycheck
Protection Program Application form issued by the Administration;
ii. Confirm receipt of information demonstrating that a borrower had
employees for whom the borrower paid salaries and payroll taxes on
or around February 15, 2020; [and]
iii. Confirm the dollar amount of average monthly payroll costs for
the preceding calendar year by reviewing the payroll documentation
submitted with the borrower’s application[.]
85 Fed. Reg. 20811, 20815. In submitting SBA Form 2484, PPP lenders also certified to the SBA
that “[t]he Lender has obtained and reviewed the required application (including documents
demonstrating qualifying payroll amounts) of the Applicant and will retain copies of such
documents in the Applicant’s loan file.”
19. To receive PPP processing fees, the PPP required lenders to submit SBA Form
1502. 85 Fed. Reg. 26321 (May 4, 2020). Form 1502 requires the lender to confirm that “all the
information” in each Form 1502 was “true and correct.” SBA Procedural Notice, No. 5000-20028
(May 21, 2020).
Kabbage
4
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20. Kabbage was an Atlanta-based non-bank, financial technology (“fintech”)
company founded in 2009, which focused on financing loans to small businesses and consumers
through its online lending platform. By March of 2020, Kabbage was struggling financially. It
had laid off a significant number of employees and suspended its lending services in anticipation
of widespread expected defaults by its small business customers. Because of its declining
liquidity, it was required to renegotiate and pay down its corporate debt early.
21. In March of 2020, Kabbage saw the pandemic and the PPP as a risk-free financial
lifeline. Kabbage’s Strategy and Operations Manager estimated that Kabbage could make over
$100 million in servicing fees in the first three months of the PPP, leading him to describe the PPP
as a “money making machine! . . . [p]lus no risk of loss.” Kabbage’s Head of Strategy wrote to
Kabbage employees on April 5, 2020: “[W]e’re looking at a legitimate opportunity of hundreds of
millions of dollars of revenue,” later adding that “you’ve seen the liquidity . . . we could definitely
use a few hundred million.” Thus, Kabbage quickly applied to participate as a PPP lender and
PPP loan service provider despite its reduced workforce.
22. On or about April 9, 2020, Kabbage submitted its application to participate in the
PPP to the SBA. On April 14, 2020, the SBA approved Kabbage’s application to participate in
the PPP as a non-bank lender. Kabbage also processed loans as a loan servicing provider for two
other PPP lenders, “Bank 1” and “Bank 2.” Kabbage represented to Bank 1 and Bank 2 that it
would originate loans on behalf of those banks that complied with program requirements. During
Kabbage’s participation in PPP, Kabbage originated or facilitated over 310,000 PPP loan
applications, and it and its partner banks received processing fees on these loans. For each loan
that Kabbage processed on behalf of Cross River and Customers, Kabbage received a fee from the
bank pursuant to its agreements with each bank.
23. In order to maximize profit from the PPP, Kabbage believed that it had to make as
many loans as quickly as possible, before PPP funding dried up. As Kabbage’s Head of New
Product Initiatives wrote: “Everyone will try to get in ASAP . . . Dear god we can make so much
money . . . it’s literally ours to lose.” The pressure within Kabbage to submit as many applications
as possible, as quickly as possible, is evident from Kabbage’s internal communications in April
2020. For example, on April 11, 2020, Kabbage’s Head of Lending Strategy and Operations
wrote: “I want like at least 50mm [in loans] ready to be sent to sba by Sunday[.] Actually I want
500mm.” The same day, Kabbage’s Strategy and Operations Manager indicated that Kabbage’s
Head of New Product Initiatives wanted “~$1bn in loan calc ready to go.”
Kabbage’s Processes for Reviewing for Fraud Were Inadequate
24. As a PPP lender, Kabbage was required to, among other things, maintain a
formalized compliance program and apply BSA/AML requirements to its PPP loan program.
Those regulations required that Kabbage have and implement a due diligence program to detect
fraud. Kabbage knew this. It had written BSA/AML procedures and created PPP-specific
BSA/AML documents. Those procedures laid out the specific steps Kabbage would take and
software Kabbage would use to verify borrowers’ identities, confirm their business information,
5
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Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 13 of 19
and evaluate their documents for fraud, prior to moving the borrower through the PPP payroll
verification process.
25. In addition to failing to comply with BSA/AML regulations, the PPP also required
Kabbage to conduct “a good faith review, in a reasonable time” of the information submitted by
the borrower. SBA PPP FAQ #1 (Apr. 3, 2020). Many of Kabbage’s procedures did not withstand
good faith review as required by the PPP, resulting in the approval of obviously fraudulent loans.
26. Though Kabbage had these written procedures on paper, the Government’s
investigation to date suggests that in practice, Kabbage systematically failed to identify fraudulent
borrowers and prevent disbursement of fraudulent loans. Kabbage used a haphazard patchwork of
several automated tools to review loans for appropriate documentation and for fraud. In many
cases, the tools didn’t work as designed and “passed” loans that should have been flagged for
further review. Loans that failed the automated system were to be reviewed manually. But
Kabbage assigned insufficient personnel to process those loans. In some instances, Kabbage
modified its automated tools to catch fewer loans, to reduce the number that would have to be
reviewed by hand. Kabbage management knew as much, but ignored concerns raised by its
employees and other financial institutions as it raced to earn processing fees.
27. Contrary to its written BSA/AML procedures, Kabbage did not perform fraud
checks until after submitting PPP loan guarantee applications to the SBA through E-Tran. Kabbage
also delayed verifying borrower identities and documents until after it had already submitted PPP
loan guarantee applications to the SBA. When told by its consultant that this practice exposed
Kabbage to regulatory and reputational risk, Kabbage did not change its practices and instead
represented to the consultant that this practice had been approved by the SBA.
28. Kabbage predominantly relied on automated document review tools to “confirm”
information contained on the application against the supporting documentation. In effect, this
meant that the vast majority of Kabbage’s loans were approved with no human review at all: more
than 90% of the more than 260,000 loans Kabbage originated or processed on behalf of its partner
banks received no human review. Kabbage’s automated fraud review check process failed to flag
obvious indicia of fraud and approved many fraudulent borrowers. The issues abounded: Kabbage
submitted to the SBA PPP loan guarantee applications that were based on incomplete
documentation. It approved borrowers that were not in existence or active at the time of the
application. It failed to detect falsified tax forms and mismatched TINs. It approved more than
4,100 loans where the borrower shared a social security number with another PPP borrower. It
approved loans where the borrower did not pass the KYC/KYB thresholds set on Kabbage
products. It did not check affiliate status or have borrowers attest to affiliate status until the end
of April 2020. It disbursed PPP loans with that its systems had flagged for fraud . Nearly 135,000
Kabbage borrowers that received PPP loans shared an IP address or device ID with another PPP
borrower.
29. A Kabbage consultant found in early June 2020 that Kabbage had not conducted
background checks on two of ten loans in a sample and that the remaining eight loans had failed
the automated background check per Kabbage’s policies, but Kabbage had no procedure in place
to address that situation.
6
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Case 25-52372-CTG Doc 117-8 Filed 06/09/26 Page 14 of 19
30. Rather than utilizing an adequate automated system and fraud check process to
address potential fraudulent PPP loan applications raised both internally and externally, Kabbage
instead lowered its thresholds on fraud detection and made other changes to keep costs to Kabbage
down. In May 2020, it changed the parameters of another fraud-detection software because costs
were “skyrocketing.” It chose not to use a third-party document-reading service because “it’s
expensive,” relying instead on a home-grown system which Kabbage reviewers openly
complained about as having allowed significant amounts of fraud through. Regarding its
KYB/KYC checks, one reviewer commented that she “would not be surprised if the passing scores
were now a piece of chewed up gum and an old bandaid.” “And no one told us,” another reviewer
added.
31. In the rare circumstance where a loan did not pass the automated checks, loans were
assigned to manual review. When it came to manual fraud reviews, Kabbage devoted insufficient
personnel and provided insufficient training to its employees and contractors. Kabbage staffed six
or seven fraud analysts during PPP. As early as May 2020, Kabbage managers noted that this team
was “overwhelmed.” Those reviewers complained that they were “drowning” under the volume
of fraud suspicions raised by other employees and needed more people. The manual reviews
sometimes identified that might have flagged the loan as fraudulent had they been incorporated
into the automated review process. A Kabbage fraud analyst worried that beefing up the standards
for their automated review tools would increase the queue of loans to review manually. Even so,
it appears Kabbage did not increase the size of the team reviewing fraudulent accounts and instead
offered incentives, in addition to overtime, for clearing accounts on weekends.
32. Other financial institutions also notified Kabbage about potential fraud in loans it
had approved after Kabbage had disbursed the funds to the borrower. These files were also
submitted to the fraud review team for review.
Kabbage Knew or Should Have Known It Approved Fraudulent PPP Loans.
33. Before the onset of the COVID-19 pandemic and before the CARES Act was
enacted, Kabbage was warned that it needed to enhance its BSA/AML procedures. In a 2019 audit
of Kabbage’s BSA/AML procedures, a third-party auditor commented that the procedures had
been subject to “limited enhancements” since the prior year and opined that the lack of remediation
was an “important weakness that requires prioritization by the Company.” Despite the warning
and recommendations from the 2019 audit, Kabbage had not implemented any of the
recommendations to its BSA/AML procedures when it began participating in the PPP.
34. Kabbage knew it did not comply with required BSA/AML procedures early on but
did not significantly alter its overall process during the first round of PPP. When Kabbage
employees identified fraudulent PPP loan applications during the manual review process, Kabbage
leadership questioned their determinations and pushed back on their review and use of common
sense in catching patterns of suspicious activity. For example, Kabbage relied on a tool to assess
borrowers that had been flagged as suspicious to determine if documents were forged or altered.
Kabbage employees raised concerns with management numerous times that the tool would not
identify as forged the unfiled tax documents that Kabbage accepted in support of PPP applications.
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Leadership did not change their practices and instead emphasized passing these types of suspicious
PPP loan guarantee applications to the SBA unless there was “definitive proof of fraud.” One
Kabbage fraud analyst complained to her supervisors in July 2020 that she was “uncomfortable”
with this procedure “because I’m not comfortable passing almost all the people I have to pass.”
“Please make sure my dog goes to a good home before I end up in prison,” she said.
35. Manual fraud reviewers were instructed accept documents provided by borrowers\,
even when Kabbage employees believed that the document was fraudulent or falsified. Kabbage’s
document review guide instructed reviewers that they did not need to look at organizational
documents so long as there was a file uploaded. If fraud reviewers considered an account
suspicious, they were instructed not to request any additional documents from borrowers on top of
the tax returns provided by the borrower that would allow them to evaluate the account. Kabbage
employees received “pushback” when they raised concerns of fraud but were essentially steered
to abandon common sense when reviewing PPP loan applications:
Kabbage fraud analyst
Kabbage sales rep
Kabbage fraud analyst
Kabbage fraud analyst
Kabbage fraud analyst
36. In May 2020, Kabbage retained an outside consultant to conduct a risk assessment
of Kabbage PPP lending and review its PPP-related policies and procedures. In June 2020, the
consultant provided Kabbage with its initial draft report on its assessment, identifying several
recommendations to improve Kabbage’s PPP processes. One of the issues identified was the
adequacy of Kabbage’s BSA/AML program, specifically its Customer Identification Program
(“CIP”), which was meant to ascertain the true identities of its PPP applicants to mitigate the risk
of identity theft, money laundering, terrorist financing, and sanctions violations. Another issue
identified was Kabbage’s inadequate customer due diligence process on applicants and beneficial
owners. Alvarez & Marsal specifically noted that as of April 2020, “Kabbage is still refining its
customer risk segmentation process for PPP loans and expects this process will likely be different
from the standard CRR [client risk rating].” A third issue identified was Kabbage’s inadequate
fraud checks because Kabbage’s PPP BSA/AML procedures permitted submission of PPP loan
applications flagged as suspicious for fraud to the SBA before Kabbage reviewed and/or cleared
said fraud flags. Another issue, among others, identified was the absence of suspicious activity
reporting procedures. At a minimum, Kabbage knew as early as June 2020, that it was not in full
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compliance with the PPP requirements to serve as a PPP lender and knew that it was falsely
certifying its compliance with PPP requirements each time it transmitted PPP loans applications
containing fraudulent information.
Kabbage Did Not Act in Good Faith.
37. Kabbage claimed that it relied on borrowers’ representations, but it did so in full
knowledge that borrowers were submitting fraudulent information and supporting documentation.
Multiple Kabbage employees noted that the tax forms provided by the borrower were “Fraud AF
[as fuck].” “[O]h god at this point i dont even know what’s real and what’s not,” another employee
commented. Another Kabbage employee noted that a borrower’s tax document claimed its annual
earnings were “100,000.00 [] on the fucking dot . . . but we have to put it down right.” This cannot
be considered reasonable, good-faith reliance on borrowers.
38. The SBA told Kabbage that when conducting fraud reviews, the PPP loans
“shouldn’t be treated any different” from loans Kabbage processed on its own behalf. Kabbage
ignored this instruction and did treat PPP loans differently. Namely, because there was no risk to
Kabbage in approving fraudulent loans, it ignored obvious indicators of fraud in its loans and
earned processing fees for submitting those loans to the SBA.
39. Also in May 2020, Kabbage’s correspondent bank flagged several loans as
potentially fraudulent and queried whether Kabbage wanted to recall the funds. A second Kabbage
risk analyst said that he didn’t think Kabbage should pursue the funds because “the SBA takes the
liability of first party fraud.” In July 2020, when Kabbage’s correspondent bank again raised
concerns about the large volume of fraudulent loans processed by Kabbage, the Kabbage employee
overseeing the KYC/KYB and fraud processes commented: “I think it’s not a loss to Kabbage,
these should be covered by SBA.” Following a lengthy discussion of obviously suspicious PPP
loan applications, it appears Kabbage employees did nothing with their observations of possible
fraud and instead, believed that it was “this kind of stuff I think sba will have to take the liability
for.” Kabbage employees knew that it was “too much,” they “should not have gone so fucking
fast,” and “maybe the banks know something we don’t lol.”
40. In an August 11, 2020 Slack communication between two Kabbage fraud analysts,
both analysts openly admitted that most of Kabbage’s loans were fraudulent:
Kabbage fraud analyst 1
Kabbage fraud analyst 1
Kabbage fraud analyst 2
Kabbage fraud analyst 2
But the attitude remained that all this fraud was the SBA’s problem, and not Kabbage’s.
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Kabbage fraud analyst
Kabbage risk analyst
Kabbage and Its Investors Enrich Themselves at the United States’ Expense.
41. Kabbage executives knew that it would not get paid processing fees until the PPP
loans were disbursed and thus, emphasized the focus on loan disbursement and submitting as many
PPP loan applications as possible.
42. Despite having to renegotiate their debt at the outset of the pandemic, Kabbage was
able to pay down all its debt by July 2020. In October 2020, newly solvent following its PPP
windfall, Kabbage sold most of its assets (with the notable exception of Kabbage’s PPP loan
portfolio and associated liabilities) to American Express (“AMEX”).
43. The very same day that it closed on the AMEX transaction, and with full knowledge
of the issues described above, Kabbage paid executives and shareholders nearly $700 million
through a dividend. As is clear from this current bankruptcy proceeding, that disbursement left
Kabbage without sufficient funds to meet its liabilities to the United States and other creditors once
the fallout of Kabbage’s flawed PPP process came to light.
Potential Damages.
44. Under the SBA’s regulations, as a PPP lender, Kabbage was required to perform a
“good faith review, in a reasonable time” of the borrower’s application. SBA PPP FAQ #1 (Apr.
3, 2020). BSA/AML requirements that were applicable to non-bank lenders such as Kabbage
under PPP rules further required Kabbage to take reasonable steps to identify its customers and
prevent fraud. It failed to do so, and falsely certified to the SBA its compliance with applicable
rules and regulations on SBA Forms 2484 and 1502 in connection with each fraudulent loan.
45. Kabbage’s submission of fraudulent PPP loan applications resulted in the
submission of false claims for payment of processing fees on the fraudulent PPP loans submitted
to the SBA for approval. Each Form 1502 submitted by Kabbage or its partner banks pertaining
to fraudulent loans due to Kabbage’s non-compliance with PPP rules and regulations, including
BSA/AML requirements, constitutes a false claim for payment of processing fees by the
SBA. Kabbage’s failure to conduct sufficient fraud checks and comply with BSA/AML resulted
in the improper payment of all processing fees associated with the fraudulent PPP loan amounts. 1
1
Contemporaneously with the filing of this Proof of Claim, the United States is filing a
second proof of claim on behalf of the United States Department of Justice, Civil Division, and
the United States Attorney’s Office for the District of Massachusetts related to a separate
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46. The United States’ investigation of these allegations is ongoing, but the potential
single damages for the Debtor’s alleged conduct total at minimum $31,468,884, related to
processing fees and forgiveness for loans flagged by Kabbage as fraud or suspected fraud. The
FCA mandates treble damages, for a total of $94,406,652. Further, civil penalties under the FCA
are mandatory. For penalties assessed after January 30, 2023, penalties range from $13,508 and
$27,018 per false claim. 28 C.F.R. § 85.5. The Debtor is alleged to have made at least 17,224
false claims based on loans it knew or should have known were fraudulent, resulting in potential
penalties between $232,661,792 and $465,358,032. Here, the United States seeks penalties of
$251,751,072. See United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., 741 F.3d 390,
408 (4th Cir. 2013) (recognizing that the United States has discretion under the FCA “to accept
reduced penalties”). In total, the United States is seeking approximately half of the maximum
penalties available under the FCA. Adding penalties to the treble damages mandated by the FCA,
the United States has a claim against Debtor in the approximate amount of at least $346,157,724.
47. The United States’ calculation of potential damages does not include loan amounts
and the corresponding processing fees Kabbage received on other fraudulent PPP loans submitted
to the SBA for loan approval and forgiveness that have yet to be identified in this investigation.
The United States reserves the right to amend this Proof of Claim, including, but not limited to,
asserting additional liabilities or adjusting the claimed amount as warranted by any facts uncovered
in any investigation.
48. The United States expressly reserves its rights pursuant to 11 U.S.C. § 553 to offset
any prepetition obligation of any agency or component of the United States—whether fixed,
contingent, or the subject of litigation as of Debtor’s prepetition date—to Debtor, or any successor
in interest of Debtor, to any such prepetition obligation, against any portion of this claim. The
United States has a secured claim to the extent of funds available to set off against its claim.
B. Amendments; Reservation of Rights.
49. The United States reserves the right to amend or supplement this Proof of Claim in
any respect, to fix or liquidate any claims stated herein, to specify and quantify expenses, damages,
attorney’s fees and costs, incurred by the United States, including seeking post-petition interest in
the event the Debtor is determined to be solvent and such claim would become due.
50. The filing of this Proof of Claim is not (a) a waiver or release of the United States’
rights, claims or defenses against any person, entity or property; (b) a waiver or release of United
States’ right to have any and all final orders in any and all non-core matters entered only after de
investigation of Kabbage’s practices as a PPP lender. The United States has made reasonable
efforts to ensure that the two claims do not overlap. Each claim constitutes an independent claim
against Kabbage.
Also contemporaneously with the filing of this Proof of Claim, the United States is filing
a proof of claim on behalf of the United States Small Business Administration related to Kabbage’s
practices as a PPP lender. Some portion of the loans that form the basis for that claim may overlap
with this claim. Each claim constitutes an independent claim against Kabbage.
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novo review by a United States District Judge; (c) a waiver or release of any right or claim of the
United States arising out of any other claim of any nature whatsoever, which the United States has
against the Debtor; (d) a waiver or release of any rights of the United States under any provision
of the Bankruptcy Code or other applicable non-bankruptcy law; (e) a consent by the United States
to the jurisdiction of the Court for any purpose other than with respect to this Proof of Claim; (f)
an election of remedy to the exclusion, express or implied, of any other remedy; (g) a waiver or
release of any rights which the United States may have to a jury trial; (h) a waiver of the right to
move to withdraw the reference with respect to the subject matter of this Proof of Claim, any
objection thereto or any other proceedings which may be commenced in these cases against or
otherwise involving the United States, including without limitation, any adversary proceeding that
was or may be commenced by any party or committee in this case; (i) a consent that this claim is
a debt which is subject to discharge in this or any other subsequent bankruptcy proceeding; (j) a
ratification or consent to any obligation or liability based upon or arising out of any transaction
between the United States and the Debtor; or (k) a waiver of the United States’ rights to make a
request for payment of an administrative expense claim under the Bankruptcy Code. All of such
rights are hereby reserved by the United States, without exemption and with no purpose of
confession or conceding any of the foregoing in any way by this filing or by any other participation
in this case.
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