In a hurry to get COVID-19 relief funds into the hands of those who needed it, the federal government provided less robust security measures than those applied in usual spending programs, trusting applicants to tell the truth about who they are and how much help they are eligible for. This led to large scale fraud perpetrated by individuals, organized crime, and international fraudsters. The total amount of the theft may never be known, but experts say it could approach $600 billion.
To date, the Justice Department has filed 1,000 criminal cases and opened civil investigations against another 1,800 individuals and companies for COVID-19-related fraud, ranging from multi-million dollar thefts to sales of fake vaccination cards. Officials say this represents only a fraction of the lost government money.
To determine the largest cases of COVID-19 relief fraud, 24/7 Wall St. reviewed U.S. Department of Justice news releases on arrests, indictments, and convictions related to COVID-19 relief fraud. Defendants and groups of co-defendants were ranked based on the total amount of relief funding they attempted to obtain from the U.S. government.
Fraud cases on this list include direct fraudulent applications to COVID-19 relief programs such as the Paycheck Protection Program and the Economic Injury Disaster Loan Program as well as federal programs that were expanded due to COVID-19 such as Medicare and state unemployment agencies. (2021 was also rife with other scams. Here are 20 of the biggest cryptocurrency scams of the past year.)
One of the most publicized examples of COVID-19 fraud was committed by Diamond Blue Smith, known as Baby Blue, a repentant Florida rapper, who falsified Paycheck Protection Program loan applications and assisted friends with other scams, to the tune of $35 million. His Farrari was seized upon his recent arrest.
The most audacious fraud scheme uncovered to date was perpetrated by Rafael Martinez and his company, MBE, through which he submitted falsified documents to receive approval to be a non-bank distributor of PPP funds. Martinez collected $70 million in lender fees and rewarded himself with a villa, private jets, and a Ferrari. (Also see, companies that changed their names after scandals.)
In fact, the COVID-19 programs have funded many mansions, luxury vacations, and high-end automobiles, and, though many of these have been forfeited and some restitution has been collected, much of the loss will not be recovered.
The laxity in the COVID-19 relief programs, and the resultant fraud, was discovered early in the program and corrective action was taken in the second year of the pandemic, with new validation requirements imposed. The changes appear to be making a difference – an important difference, as there is still another $600 billion in COVID-19 aid to be spent.
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