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Report: Online Lending Platform Issued $7M in PPP Loans to Fake Recipients

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Online lending platform Kabbage issued 378 Paycheck Protection Program loans worth $7 million to fake recipients, according to a new report by ProPublica.

Some of the businesses that obtained loans through the Georgia company had names like ”Ritter Wheat Club” and ”Deely Nuts,” a wheat farm and tree nut farm, respectively. Each got $20,833, the maximum amount available for sole proprietorships.

Another company named ”Tomato Cramber” received $12,739 and ”Seaweed Bleiman” $19,957. All said they were based in New Jersey.

None of the entities existed in the state’s business records and the owners of the homes of the businesses’ location were surprised when ProPublica reached out to them.

”There’s no farming here: We’re a sandbar, for Christ’s sake,” said Joe Mancini, the mayor of Long Beach Township in Jersey where ”Beefy King,” supposedly a cattle ranch, said it was located.

Kabbage in total processed nearly 300,000 PPP loans before the first round of funds expired, second only to Bank of America.

”Pushing this through financial institutions created some pretty bad incentives,” Naftali Harris, the CEO of SentiLink, which helps lenders detect potential identity theft, told ProPublica. ”This is definitely a case where companies that decided they wanted to be more careful in terms of giving out loans were penalized for doing so.”

The Small Business Administration in January estimated that the agency approved about 55,000 business loans totaling approximately $7 billion that were given to potentially fake businesses.

Reuters earlier this month reported that the U.S. Justice Department was investigating whether financial tech companies, including Kabbage Inc., may have erred while distributing billions of dollars in pandemic aid.

The investigation, led by the Justice Department’s civil division, is examining whether Kabbage and other fintech companies miscalculated how much aid borrowers were entitled to from the Paycheck Protection Program (PPP) due to confusion over how to account for payroll taxes, the three people said.

Kabbage Inc., which manages Kabbage’s PPP loans and also goes by the brand K Servicing, did not respond to multiple calls and emails seeking comment. Spokespeople for American Express Co. (AXP.N), which in August bought most of Kabbage’s assets other than its loan portfolio, declined to comment.

Information from Reuters was used in this report.

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