When the government rolled out emergency loans to help small businesses survive the COVID-19 crisis, many relied on these funds to keep their doors open.
Unfortunately, some saw it as an opportunity to exploit the system.
One such case recently came to light in Illinois.
Chicago Man Sentenced for PPP and EIDL Loan Fraud
Farooq Khan, a 31-year-old from Chicago, was sentenced yesterday to 42 months in prison for his part in a major fraud involving millions of dollars meant for struggling small businesses.
Khan ran a tax preparation business called Hannan Tax Services and used it to submit fake applications for COVID relief loans.
How the Fraud Worked
Between May 2020 and October 2021, Khan prepared and filed at least 30 fraudulent loan applications under the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program.
The twist? The companies he was applying on behalf of were either non-operational or didn’t exist at all.
Khan knowingly falsified key details like employee counts and tax documents to make the applications look legitimate.
This scheme led to more than $3.6 million being wrongfully distributed by the Small Business Administration (SBA) and participating lenders.
Khan managed to personally pocket about $1.2 million of that amount.
Legal Consequences and Restitution
Khan pleaded guilty to wire fraud back in February and, along with his prison sentence, he was ordered to pay back the full $3.6 million in restitution.
The case was prosecuted by the Justice Department’s Criminal Division and investigated by the FBI and Homeland Security’s ICE unit in Chicago.
Ongoing Efforts to Catch COVID Relief Fraud
Authorities are keeping a close watch for other similar fraud cases related to COVID-19 relief programs.
If you suspect any fraudulent activity involving these loans or grants, you’re encouraged to report it.
The Justice Department runs a dedicated hotline and online complaint form to make it easy for people to come forward with information.