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ARTICLE · 12 SEPTEMBER 2022

Fintechs Face DOJ, House Scrutiny Over PPP Lending

Bilzin Sumberg Baena Price & Axelrod LLP
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In a June 3, 2022 court filing, Kabbage, Inc. (doing business as KServicing), a fintech lender, disclosed that it is under investigation by the U.S. Department of Justice ("DOJ") under the False Claims Act.

United StatesTechnology
Philip R. Stein
Philip R. Stein

In a June 3, 2022 court filing, Kabbage, Inc. (doing business as KServicing), a fintech lender, disclosed that it is under investigation by the U.S. Department of Justice ("DOJ") under the False Claims Act. The investigation, Kabbage further disclosed, relates to its Paycheck Protection Program ("PPP") loan approval practices. Three months earlier, the DOJ charged a former CEO of a fintech lender (MBE Capital Partners) with wire fraud, bank fraud and making false statements to the Small Business Administration ("SBA"), in what we believe is the first criminal prosecution involving the activities of a PPP lender.

These and other recent developments are part of what appears to be a significant new DOJ initiative: enforcement activity targeting fintech firms and other financial institutions that processed loans under the PPP. The PPP was enacted as part of the CARES Act on March 27, 2020, in response to Covid-19 and was launched by the Small Business Administration

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