The Small Business Administration just announced the suspension of 111,620 California borrowers after uncovering a massive $8.6 billion in suspected fraudulent activity linked to pandemic relief programs. SBA Administrator Kelly Loeffler emphasized that this crackdown is the most significant effort yet against those who allegedly defrauded the government during the COVID-19 pandemic.
The SBA reported that these individuals received a total of 118,489 loans through two major programs: the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL). If you recall, PPP was the federal program designed to give small businesses money to keep their workers employed when the economy shut down. EIDL loans were meant to provide low-interest disaster relief funds to help businesses survive the crisis.
According to Fox News, Loeffler claimed that this action illuminates the scale of corruption that “the Biden Administration tolerated for years.” She went on to connect the fraud to state policies, arguing that the Trump SBA is taking decisive action “in a state whose unaccountable welfare policies have created a culture of fraud and abuse at the expense of law-abiding taxpayers and small business owners.”
Well, that’s a seriously strong accusation
However, California officials are hitting back hard. California Attorney General Rob Bonta dismissed the Trump administration’s claims of persistent, widespread fraud just the day before the announcement, calling them “baseless claims.” Bonta argued that California isn’t perpetuating fraud, but is actually the victim of it.
He noted that the state’s programs are critical for helping lower-income families access necessities like healthcare, food, and housing assistance. His office pointed out that California has actually recovered nearly $2.7 billion in various fraud schemes over the last ten years, often by partnering with the federal government. Governor Gavin Newsom’s Press Office also got involved, publicly mocking the SBA announcement on X.
OMG. The Trump Administration found MAJOR FRAUD in programs THEY control. The state has no role running / administering these programs.
— Governor Newsom Press Office (@GovPressOffice) February 6, 2026
Were they hiding this???
California doesn’t hide fraud … we fight it. Nearly 1,000 arrests + over $125 billion STOPPED under @CAGovernor… https://t.co/pSxBW0t39S
The SBA’s intense scrutiny of California follows a similar, though smaller, investigation in Minnesota. Loeffler confirmed that the SBA previously suspended 6,900 borrowers in Minnesota who were associated with nearly 7,900 potentially fraudulent PPP and EIDL loans, totaling around $400 million. Minnesota has become a focus for the Trump Administration as they investigate social service and immigration fraud.
Loeffler made it clear that the SBA is treating California just like Minnesota, working with federal law enforcement to find the criminals, hold them accountable, and recoup the stolen funds. “As we continue our state-by-state work, our message is clear: pandemic-era fraudsters will not get a pass under this Administration,” Loeffler promised.
