Security & Fraud

DOJ Alleges Man Faked 120 Employees To Get $3M PPP Loan

A 44-year-old Texas man, Fahad Shah, was charged with fraud for allegedly attempting to file fake loan applications for the Paycheck Protection Program (PPP), according to a press release from the Department of Justice (DOJ).

Shah has been charged with three counts of wire fraud, one count of making false statements to a bank and four counts of money laundering.

According to the release, Shah has been submitting fraudulent loan applications for $3 million in PPP loans to two different approved lenders, using the name WBF Weddings by Farah Inc. He allegedly claimed falsely to have over 120 employees when he had none at all, and reportedly submitted documentations full of false statements, the release states.

As a result, Shah allegedly received more than $1.5 million in PPP loans from the government. Allegedly, he used that money for personal means, such as buying a Tesla vehicle and making home mortgage payments, the release states.

The CARES Act, passed by the U.S. government in late March, aimed to quickly address a number of financial problems from the rapid onset of the pandemic, including aiding small- to medium-sized business (SMB) owners and individuals affected by the economic downturn.

Fraud related to the coronavirus and the PPP has become widespread over the past three months as fraudsters and scammers took advantage of the situation. According to a recent PYMNTS report, 22 percent of Americans reported being targeted by some form of a fraud attempt related to the virus, and the scams have taken around 1.2 million Canadian dollars ($865,800) in Canada and 800,000 pounds ($1 million) in the U.K.

The rise in fraud comes from the quick shift to digital services much of the world experienced as shopping physically became unavailable. Phishing scams in which fraudsters impersonated banks to glean personal information were rampant. And phone scams in which criminals pretended to be from the victim’s bank to glean information were prevalent as well.

In terms of the PPP specifically, scams where individuals illegally applied for PPP loans have been logged, too.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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