Federal SBA Disaster Loan Fraud Beyond PPP
Everyone talks about PPP fraud. You've seen the headlines - the arrests, the indictments, the sentences. Doctors buying Lamborghinis. Restaurant owners building mansions in the Dominican Republic. The government has made an example of PPP fraudsters, and the message is clear. But there's another program that disbursed over $400 billion during the pandemic, and the federal government is prosecuting fraud against it just as aggressively.
Economic Injury Disaster Loans. EIDL. And nobody is paying attention.
The same 10-year statute of limitations applies. The same federal charges. The same prison sentences. The SBA Office of Inspector General has more than 580 ongoing investigations specifically targeting EIDL fraud. The Central District of California alone has prosecuted over 100 EIDL cases, with sentences ranging from 20 months to 17 years. If you received an EIDL loan during COVID-19 and your application contained inaccuracies - intentional or otherwise - the government has until 2030 or 2031 to come for you.
Welcome to Spodek Law Group. We handle federal defense for EIDL fraud investigations and prosecutions. If you've received a letter from the SBA Office of Inspector General, if federal agents have contacted you, or if you're simply worried about an EIDL application you submitted years ago - this article explains what you're actually facing.
The EIDL Problem Nobody Is Talking About
PPP and EIDL were different programs with different structures. PPP loans could be forgiven - you didn't have to pay them back if you met certain conditions. EIDL loans are actual loans. You're supposed to repay them over 30 years at low interest. The government gave you money that you were expected to return.
But heres the thing most people miss.
EIDL also included something called an "advance" - up to $10,000 that you didn't have to repay. The government called it a grant. Free money. Everyone applied for it. That advance is were the problem starts.
According to Pandemic Oversight, as of December 31, 2024, the federal government has charged 3,096 defendants with pandemic relief fraud. Of those, 2,532 have been convicted - an 82% conviction rate. Of those convicted and sentenced, 81% received prison time. These aren't just PPP cases. EIDL fraud is a major component of federal pandemic fraud prosecution.
Now heres what prosecutors aren't advertising.
That $10,000 "advance" that was marketed as a grant? If your EIDL application contained false statements, prosecutors treat every dollar of that advance as fraud proceeds for sentencing purposes under Federal Sentencing Guidelines section 2B1.1. The word "grant" provides absolutley no protection. Casie Hynes submitted more than 80 fraudulent applications seeking EIDL advances - she's now serving 60 months in federal prison. The grant designation meant nothing.
In August 2022, Congress passed the COVID-19 EIDL Fraud Statute of Limitations Act. It extended the statute from 5 years to 10 years - retroactively. If you recieved your EIDL loan in June 2020, the government can investigate and file charges through June 2030. A 2021 loan means your exposed until 2031. The government gave itself a full decade.
And this isnt just about COVID. EIDL has existed for decades as SBA's primary disaster relief program. Six Houston-area residents were charged with EIDL fraud after Hurricane Harvey - Clinton Booker allegedly obtained $25,000 from a fraudulent SBA disaster loan and faces up to 50 years in federal prison. The investigative infrastructure built for pandemic fraud now applies to every future natural disaster.
How One EIDL Application Becomes Multiple Federal Charges
The EIDL program itself dosent have criminal provisions. There's no "EIDL Fraud Act" with specific penalties. So how are people going to federal prison?
The DOJ uses pre-existing fraud statutes to prosecute EIDL fraud. One application can trigger multiple charges:
- Wire Fraud (18 U.S.C. § 1343) - 20-30 years maximum
- Bank Fraud (18 U.S.C. § 1344) - 30 years maximum
- Fraud in Connection with Major Disaster (18 U.S.C. § 1040) - 30 years maximum
- False Statements (18 U.S.C. § 1001) - 5 years maximum
- Money Laundering (18 U.S.C. § 1956) - 20 years maximum
- Aggravated Identity Theft (18 U.S.C. § 1028A) - mandatory +2 years consecutive
One EIDL application can create theoretical exposure exceeding 100 years. In practice, sentences dont reach that level, but charge stacking gives prosecutors enormous leverage in plea negotiations. When your facing wire fraud, bank fraud, and disaster fraud charges all at once, the calculus around cooperation changes dramatically.
Federal investigators build EIDL fraud cases through digital forensics. They compare your application data to IRS records, bank statements, business registration databases, and payroll records. If you claimed employees who didnt exist, revenue that wasnt real, or a business address that was actually your apartment - they can document all of it. The SBA processed these applications quickly during the pandemic, but every piece of data you submitted is now searchable.
What Happens When EIDL Fraud Gets Prosecuted
Michael Lain of Arizona submitted fraudulent EIDL applications for more then 70 limited liability companies. He was sentenced to 32 months in federal prison, ordered to pay $622,683.40 in restitution, fined $20,000, and placed on three years of supervised release after prison. That's what happens when EIDL fraud gets prosecuted.
Recent sentencing examples from DOJ and Secret Service press releases:
- Daniel Lee Ramsey (Kentucky): 78 months for over $2 million in fraudulent EIDL and PPP loans. Fabricated payroll expenses and employee numbers. Ordered to pay $2,074,684 in restitution.
- Martez Johnson (Louisville): 46 months for $1.8 million. Submitted an EIDL application claiming a construction company with 30 employees and $2.4 million annual revenue - but operated no such business.
- Antonio Brown-Sanders (Charleston): 12 months for $65,246. Single fraudulent EIDL application.
There is no "too small to prosecute."
The sentencing data from the Central District of California - which has prosecuted more EIDL fraud cases than almost any other district - shows sentences ranging from 20 months to 17 years. The amount matters for calculating sentencing guidelines, but judges in 2025 include prison time in nearly every EIDL fraud case regardless of the dollar amount.
And then theirs the insider problem. Rena Barrett was a loan officer at the SBA. In August 2025, she pleaded guilty to approving over $550,000 in fraudulent COVID-19 loans - including her own application. When SBA initially declined her personal request for $170,000, she approved it herself. She also approved loans for her relatives. The people processing your EIDL application may have been committing fraud themselves.
What to Do If Your Under Investigation
The single most important rule:
Never agree to discuss an EIDL fraud investigation with a federal agent without a lawyer present.
This sounds obvious. But there have been multiple recent cases where people who decided to talk to investigators without counsel ended up being charged with obstruction or making false statements to federal agents - in addition to the underlying EIDL fraud. The agents seem friendly. Cooperative. They're not on your side.
Heres the trap most people fall into with EIDL.
Some people, panicking, decide to voluntarily repay the loan thinking it will make the problem go away. The SBA has recovered nearly $30 billion in EIDL funds - $8 billion returned by financial institutions, another $20 billion returned by borrowers. But voluntary repayment without counsel can be used as evidence of consciousness of guilt. Returning the money doesn't make the fraud go away - it can actually strengthen the government's case.
If you're under investigation or concerned you might be:
- Don't destroy any documents. Document destruction can become a separate obstruction charge.
- Don't discuss the matter with others who may be involved. Those conversations can be used against you.
- Don't make voluntary payments to the SBA without counsel. This can be used as consciousness of guilt.
- Contact a federal defense attorney immediately. The earlier you act, the more options exist.
Todd Spodek has handled EIDL fraud defense in federal court. He understands the difference between OIG-stage investigations where civil resolution may be possible, and FBI-stage investigations where criminal defense is the priority. The window between an SBA OIG flag and FBI criminal referral is typically six to twelve months - and during that window, there's leverage that completely disappears once criminal charges are filed.
When Your Ready
If you received an EIDL loan during COVID-19 - or a disaster loan after a hurricane, wildfire, or other declared emergency - and you're concerned about how that application was prepared, Spodek Law Group can help you understand where you stand.
The consultation is free. Theirs no obligation.
What you'll get is an honest assessment. Is this still at the OIG stage where civil resolution might be possible? Has it been referred to the FBI? What does the evidence look like? What are realistic outcomes based on how these cases play out in federal court?
Call us at 212-300-5196. The statute of limitations runs until 2030 or 2031 depending on when you got the loan. The government has time. But once they move, things happen fast. The earlier you have counsel, the more leverage exists.
Don't wait until federal agents show up at your door.
Were here when you need us.
