A co-founder of Blueacorn, a Paycheck Protection Program (PPP) lender service provider, has been sentenced to 10 years in federal prison for orchestrating one of the largest known COVID-19 relief fraud schemes that caused more than $65 million in losses, according to the U.S. Department of Justice (DOJ).
Nathan Reis, 47, of Rio Grande, Puerto Rico, was also ordered to pay more than $66 million in restitution after pleading guilty to conspiracy to commit wire fraud, the DOJ said. Prosecutors described the case as one of the largest PPP-related fraud schemes uncovered nationwide.
The Paycheck Protection Program (PPP), launched by the U.S. government in 2020, provided almost $1 trillion in forgivable, low-interest loans to help small businesses maintain payroll, rehire employees, and cover operational costs during the COVID-19 pandemic.
The Small Business Administration (SBA) managed the program, which also provided aid to nonprofits, self-employed individuals, and independent contractors. Lending service providers such as Blueacorn operated as third-party partners for lenders, managing aspects of the loan process—including initial applications for the COVID-19 relief funds.
“Stealing money from federal relief programs is stealing money contributed by taxpayers to help individuals and small businesses survive economic hardship. This sentence sends a clear message that people who exploit government programs to enrich themselves will be brought to justice,” Galeotti said.
According to court documents, Reis co-founded Blueacorn in April 2020, claiming the company would help small businesses and individuals obtain SBA-backed PPP loans under the CARES Act. Instead, Reis and his co-conspirators submitted loan applications containing materially false information, including fabricated tax documents and bank statements, prosecutors said.
Authorities said the scheme involved more than 530 fraudulent PPP loans and resulted in losses exceeding $65 million. Reis and others also charged borrowers fees based on a percentage of the loan amounts, which is prohibited under PPP rules, according to prosecutors.
“In a critical time for our nation, when businesses were trying to survive a worldwide pandemic, this defendant egregiously lined his own pockets via his massive fraud scheme,” said U.S. Attorney Ryan Raybould for the Northern District of Texas. “He and others who criminally exploit federal funding will be prosecuted to the fullest extent in our district."
Acting Assistant Director Rebecca Day of the FBI’s Criminal Investigative Division said that “abusing government programs and exploiting a national emergency will never be tolerated.”
Since the CARES Act was enacted, the Justice Department’s Fraud Section has prosecuted more than 200 defendants in over 130 PPP fraud cases and seized more than $78 million in fraud proceeds, according to the DOJ.