Colorado PPP Loan Fraud Lawyers: Federal Defense in the Strike Force Capital

The SBA audit letter looks like a chance to explain your mistake. It asks you to "clarify discrepancies" in your Paycheck Protection Program application, provide additional documentation, and maybe walk through your calculations. It reads like an administrative compliance check - the kind of government paperwork you handle with your accountant on a Tuesday afternoon. But by the time you receive that letter, the federal criminal investigation has been running for 4-6 months. FBI agents already pulled your bank records through grand jury subpoenas. The IRS already has your tax returns sitting next to your PPP application, and investigators have already identified every number that doesn't match. Federal agents already interviewed your employees, your accountant, and maybe your bank officer. The evidence collection is complete. The case is built. The audit letter isn't advance notice or a courtesy. It's bait.

And if you respond without a federal criminal defense attorney, everything you write becomes wire fraud evidence. "I may have overstated my payroll expenses on the PPP application" isn't an explanation - it's a confession to wire fraud under 18 USC 1343, which carries 20 years in federal prison per count. "I didn't realize PPP required exact figures from my tax returns" doesn't show good faith - it admits you submitted false information to a federally insured institution, which is bank fraud under 18 USC 1014, punishable by up to 30 years and a $1 million fine. The letter is designed to make you provide admissions that transform a circumstantial case into a confession-based prosecution. Business owners think explaining discrepancies will resolve the issue. Instead, they hand prosecutors the only evidence they were missing: a written statement from the defendant admitting the application contained false information.

This matters especially in Colorado, because on July 11, 2023, the Attorney General selected the District of Colorado's U.S. Attorney's Office to head one of only five national COVID-19 Fraud Strike Force Teams in the entire country. Colorado isn't just prosecuting PPP fraud cases. Colorado is a designated Strike Force hub, which means dedicated prosecutors working only pandemic fraud, data analysts who specialize in financial forensics and pattern recognition, and cases that move through the federal system with what the Department of Justice describes as "unusual efficiency." The U.S. Attorney's Office for the District of Colorado has publicly stated they are actively investigating 40 to 50 additional PPP and EIDL fraud cases worth an estimated $75 million in aggregate right now. And if you applied for a PPP loan using one of the big fintech lenders like Blueacorn or Womply, there's a decent chance the wire transfer routed through a Colorado bank, which creates federal jurisdiction in the District of Colorado even if you've never set foot in the state. Geography follows the wire, not the defendant.

The Strike Force That Doesn't Forget Your Case

Colorado didn't become one of five national Strike Force hubs by accident. But here's the thing about the Strike Force designation - it's self-reinforcing. More prosecutorial resources mean higher detection rates. Higher detection rates mean more cases. More cases mean prosecutors who develop pattern recognition because they're seeing the same fraud schemes hundreds of times. Data analysts who specialize exclusively in pandemic relief fraud start spotting anomalies faster - the fabricated Form 941 that shows quarterly payroll tax withholdings that don't match IRS records, the inflated employee count that doesn't align with state unemployment insurance filings, the business bank account that received PPP funds on Monday and transferred the same amount to a personal account on Tuesday.

Richard Nieto found out how it ends. He owned Denver Pro Painting & Contracting in Morrison, Colorado. He submitted three fraudulent PPP loan applications seeking $1,117,903.56 total. He was successful in obtaining two loans totaling $913,551.88. In the first application for $175,384.83, he inflated the number of employes and average monthly payroll, and he fabricated Forms 941 - the quarterly payroll tax returns - that didn't match the actual tax documents on file with the IRS. Despite telling the lender he would use PPP loan money on buisness expenses, he transferred the funds through multiple intermediate accounts before using it to pay his home mortgage, purchase bitcoin, buy gold and silver coins, and invest in a friend's startup business. In June 2025, he was sentenced too 46 months in federal prison and ordered to pay $962,438.85 in restitution. The Strike Force had his bank records, his IRS returns, his fabricated forms, and his blockchain transactions showing the bitcoin purchases. The case was mathematical.

The Audit Letter That's Actually a Criminal Investigation

By the time the SBA sends you that letter requesting additional documentation, federal investigators have typically been working your case for 4-6 months. The SBA Office of Inspector General flagged your loan using automated data analytics. The SBA identified discrepancies and referred your case to the FBI. The FBI opened an investigation. Federal agents obtained grand jury subpoenas for your bank records - not just the business account, but your personal accounts, your spouse's accounts, any account with your name attached. They issued administrative summonses to the IRS for your tax returns going back multiple years. They interviewed people:

• Your employees
• Your accountant
• Your bank officer
• Maybe your business partner
• Maybe your spouse

And then, after all that evidence is collected, the SBA sends you a letter asking you to "clarify" why your PPP application listed 12 employees but your 2019 Form 941 shows only 4. The letter is polite. It's bureaucratic. It gives you a deadline. It doesn't mention the FBI. It doesn't mention that anything you write in response will be shared with the Department of Justice. It doesn't warn you that you have the right to remain silent, because at this stage, your not yet a defendant - your a subject or target of an investigation.

So business owners respond. They write: "I may have miscalculated the number of employees." Or: "I estimated my monthly payroll based on projected hiring that didn't happen." Or the worst one: "I didn't realize the PPP application required exact figures from my tax returns."

Every one of those statements is a confession. "I may have miscalculated," admits you submitted inaccurate information. "I estimated based on projected hirin,g" admits the numbers on the application didn't reflect actual payroll. "I didn't realize it required exact figures" admits you didn't read the certification you signed. You signed it. You certified accuracy. And now your telling the SBA - and the DOJ - that the information wasn't accurate. Wire fraud. 18 USC 1343. Up to 20 years per count.

Charles Lacona Jr. learned this. Between April 2020 and April 2021, he devised a scheme to defraud a lender of $513,732.50 in PPP loans. He inflated payroll costs and gross receipts, made false statements, and submitted fabricated tax documents. He used some of the funds to purchase a Cadillac CT6 for $67,704.13. In January 2025, after a federal jury found him guilty on two counts of wire fraud and one count of money laundering, he was sentenced to 24 months in federal prison and ordered to pay $549,274.14 in restitution.

How a Florida Business Gets Prosecuted in Colorado

You live in Florida. You've never been to Colorado. Your business operates entirely in Florida. But you applied for your PPP loan through Blueacorn or Womply. That platform used a partner bank headquartered in Colorado.

The moment that wire transfer moved money from the bank in Colorado to your business account, federal jurisdiction attached in the District of Colorado. Wire fraud occurs when someone uses interstate wire communications to execute a scheme to defraud. The statute doesn't require that the defendant live in the state where the wire originated. The wire went through Colorado. Colorado has jurisdiction.

Which means you get charged in Colorado federal court. Which means your case is prosecuted by the Colorado Strike Force. Which means you're facing prosecutors who work these cases full-time and have seen every defense strategy in their current pipeline of 40-50 active investigations worth $75 million.

Real Examples:

Joseph Ronald Trenkle tried running. He lived in Cherry Hills Village, Colorado. Between April 2020 and February 2022, he allegedly obtained nearly $5 million in COVID-19 relief funds. When federal investigators started closing in, he relocated to Dorado, Puerto Rico. In May 2025, he was charged in the District of Colorado with wire fraud and money laundering. Geography didn't save him. The wire transfer happened in Colorado.

Joshua and Magdalena Lybolt stayed in Castle Rock, Colorado, and allegedly used $5 million in fraudulent PPP funds to purchase a 2022 Porsche Taycan, a Range Rover, country club memberships, and real estate properties. They were indicted in July 2024. The government didn't need confessions. They had bank records showing the PPP deposits, dealership records showing the car purchases, and title records showing the real estate acquisitions. The money went from Point A (PPP loan) to Point B (Porsche dealership) with your name on both transactions.

The 95% Conviction Rate Nobody Beats

The federal conviction rate for pandemic fraud cases is 95-97.4%. That's the actual conviction rate based on cases resolved as of December 31, 2024, according to the COVID-19 Fraud Enforcement Task Force. At least 2,393 defendants - almost 95% - have been found guilty of fraud-related charges involving pandemic relief programs. If you get charged, your going to be convicted. The question isn't guilt or innocence. The question is how many years and how much restitution.

Why is the conviction rate so high? Because federal prosecutors don't charge cases they can't prove. The SBA Office of Inspector General flagged 669,000+ potentially fraudulent PPP loans using automated data analytics. The FBI and DOJ don't have resources to prosecute 669,000 cases. So they prioritize: high-dollar fraud amounts, clear documentary evidence, defendants who made it easy by spending PPP money on Porsches and bitcoin. By the time you get charged, the case is already built.

Even worse: defendants sentenced in 2024-2025 are receiving prison terms 40% longer on average than defendants sentenced in 2021-2022 for identical conduct. Federal judges have lost patience. In 2021, first-time offenders with fraud amounts under $500,000 were often getting probation or home confinement. In 2025, those same defendants are getting 18-24 months in federal prison. The compassion that existed for pandemic-era desperation has evaporated. Judges see PPP fraud defendants every week now.

Jon Hallford got 240 months - that's 20 years - in federal prison. Hallford's case involved more than just PPP fraud. He owned Return to Nature Funeral Home in Colorado Springs and mishandled at least 190 bodies over four years while defrauding the SBA. In some of the most egregious cases, he provided family members with urns filled with dry concrete mix instead of the cremated remains of there loved ones. But 240 months demonstrates that federal judges in this district are willing too impose serious prison time.

What Buying Bitcoin Actually Costs You

Using PPP funds to purchase bitcoin isn't just a violation of the program rules. It's money laundering under 18 USC 1956. Money laundering occurs when someone conducts a financial transaction involving proceeds of wire fraud. When you obtained PPP funds through a fraudulent application, and then used those funds to purchase cryptocurrency, you engaged in money laundering. Money laundering carries up to 20 years in federal prison per count, separate from and in addition to the wire fraud charges.

Richard Nieto's bitcoin purchases led to separate money-laundering counts. The government didn't have to prove he was trying to hide the money. They only had to prove he used fraud proceeds to buy bitcoin. The blockchain transactions provided irrefutable evidence. Federal investigators subpoena the exchange (Coinbase, Kraken, Binance.US), get your transaction history, match it to the timing of your PPP deposit, and the case is made.

Investing in a friend's startup with PPP funds creates an even worse problem: a conflict of interest. If your friend knew the money came from a fraudulent PPP loan, your friend would become a co-defendant. Federal prosecutors interview your friend. They explain that he's facing 20 years. But if he cooperates - if he testifies that you told him the PPP application contained inflated numbers - he might get probation. Most people can't resist that offer. Your friend flips. And suddenly, the government has a witness who will testify that you admitted the fraud.

The Helper Who Became Your Co-Defendant

A lot of PPP defendants say, "I didn't fill out the application myself. My friend did it. I just signed it." They think that creates distance from the fraud. It doesn't. In most cases, it creates a conspiracy charge.

If you hired a licensed CPA or attorney, disclosed all relevant facts, and followed their advice in good faith, you have what's called a "reliance defense." But if you used an informal helper - your cousin who "knows about business stuff," someone you met on Facebook - you have no reliance defense. And worse: you might have created a conspiracy.

Conspiracy to commit wire fraud occurs when two or more people agree to commit wire fraud and take any act in furtherance of that agreement. If your helper prepared an application showing inflated payroll numbers, and you signed it knowing the numbers were false, that's conspiracy. And now you're both facing charges.

Federal prosecutors are really good at flipping co-defendants. They interview your helper separately. They explain: "You're facing 20 years. But if you cooperate, we'll recommend probation." Your helper becomes a government witness.

Even family members flip. Ronald Philip Wallace and Stace Yater Wallace - a married couple - were indicted on charges of wire fraud, money laundering, and bank fraud. They allegedly worked together to obtain over $200,000 in COVID-19 PPP funds. When prosecutors charge a family unit, they interview each person separately and offer cooperation deals. The first person to cooperate gets the best deal. Spouses who thought they'd present a united front end up in separate conference rooms, each being told that the other might flip first.

Why This Continues Through 2033

Congress extended the statute of limitations for pandemic fraud to 10 years. PPP loans obtained in 2020 can be prosecuted until 2030. The SBA Office of Inspector General has publicly stated that PPP investigations will continue for years. They're investigating loans that have already been forgiven - because forgiveness is a separate administrative process from criminal prosecution. Your loan can be officially discharged by the SBA while you're simultaneously under federal criminal investigation. Forgiveness doesn't equal exoneration.

As of December 2024, the SBA Office of Inspector General's oversight has resulted in approximately:

• 1,255 criminal indictments
• 985 arrests
• 683 convictions

The COVID-19 Fraud Enforcement Task Force has charged more than 3,500 defendants. Those numbers are going to increase every year through 2033. The SBA flagged 669,000+ potentially fraudulent loans worth approximately $64 billion.

Colorado's Strike Force designation means cases keep getting referred here. The jurisdiction follows the wire transfer. If your loan was funded through a Colorado bank - even if you live in Texas or Florida - your case can be prosecuted in the District of Colorado.

When You Need Federal Defense Counsel

If you receive an SBA audit letter, or a target letter from the U.S. Attorney's Office, or a call from an FBI agent, you need a federal criminal defense attorney immediately. Not a state criminal defense lawyer. Not your business attorney. You need a lawyer who practices regularly in federal court and understands federal fraud statutes.

Federal criminal cases are fundamentally different from state cases. The prosecutors are more experienced and better resourced. The penalties are more severe. The conviction rate is higher.

The most important thing a lawyer does is stop you from talking

No responses to audit letters without attorney review. No meetings with federal agents without counsel present. Anything you say becomes evidence at trial.

A federal defense attorney can evaluate the government's case. Your attorney can assess: How strong is the documentary evidence? Do they have witnesses? What are the best defenses? That evaluation drives strategy.

The reality is that 95-97.4% of PPP fraud defendants are convicted. A skilled federal defense attorney can negotiate the terms of a plea agreement: which counts you plead to, what the sentencing recommendations are, how restitution gets calculated. The difference between pleading to one count versus three counts plus money laundering can be years in prison.

If you're convicted, the sentencing phase is where your attorney makes the biggest difference. Federal sentencing involves a guidelines calculation, but judges have discretion to depart below the guidelines. Your attorney can present evidence of your cooperation, your remorse, your efforts to make restitution. The difference between a guidelines sentence and a below-guidelines sentence can be 30-40% less prison time.

Spodek Law Group: Federal Defense in Colorado Strike Force Cases

At Spodek Law Group, we represent clients facing federal fraud charges throughout the country, including in the District of Colorado. Our firm handles complex white-collar cases - wire fraud, bank fraud, money laundering, tax fraud - and we understand how Strike Force prosecutions work. We know the prosecutors, we know the judges, and we know the strategies that succeed in federal court. If you've received an SBA audit letter, a target letter, or any communication suggesting a PPP fraud investigation, call us at 212-300-5196. The initial consultation is confidential, and we can walk you through what your facing and what your options are.

Todd Spodek founded Spodek Law Group with a mission: provide clients facing serious federal charges with the kind of representation usually reserved for corporate executives. Federal fraud cases require significant resources - investigators who can analyze financial documents, expert witnesses who can challenge the government's forensic accounting, attorneys who can go toe-to-toe with experienced federal prosecutors. We commit those resources because we understand what's at stake. A federal fraud conviction doesn't just mean prison time. It means a permanent felony record that destroys employment prospects, professional licenses, and financial opportunities for the rest of your life.

The Strike Force designation means Colorado prosecutions are moving faster and hitting harder than fraud cases in other districts. You don't have time to wait and see what happens. By the time you get the audit letter, the investigation has been running for months. By the time you get the target letter, charges are imminent.

Don't respond to government inquiries without counsel. Don't assume that because you didn't intend to defraud anyone, you won't be charged. Intent is proven through circumstantial evidence - the false statements on the application, the fabricated documents, the personal expenditures. And don't assume that because it's been a few years since you got the PPP loan, the government has moved on. The 10-year statute of limitations means investigations will continue through 2033.

Federal PPP fraud cases are among the most defensible white-collar prosecutions - if you have experienced counsel and you act early. But they're also among the most punishing if you handle them wrong. The difference between probation and 46 months in federal prison often comes down to what you said in response to that audit letter, whether you hired the right attorney, and whether you understood the stakes before it was too late.

Colorado is the Strike Force capital. The prosecutors are specialists. The conviction rate is 95%+. And the era of probation is over. If your facing a PPP fraud investigation, you need a federal criminal defense attorney who understands this landscape. Call Spodek Law Group at 212-300-5196. We handle these cases, and we know how to fight them.