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- Fake firms collected $7 million in COVID-19 small business relief through online lender Kabbage, ProPublica found.
- Most fake businesses were registered as farms, with names including "Deely Nuts" and "Beefy King."
- Kabbage processed 378 loans to fraudulent companies via the Paycheck Protection Program, ProPublica reported.
- See more stories on Insider's business page.
Fake businesses received a collective $7 million in federal COVID-19 relief loans last year through online lending platform Kabbage, and most were registered as farms, according to an investigation by ProPublica.
Kabbage processed 378 loans to bogus businesses under the Paycheck Protection Program (PPP) in the scheme's first round of funding from March to August last year, the investigation found. Non-existent farms claiming to be based in New Jersey, such as "Ritter Wheat Club" and "Deely Nuts," each received $20,833, the maximum loan available to sole proprietorships, ProPublica reported.
The Coronavirus Aid, Relief, and Economic Security Act (CARES), passed in March 2020, funded the PPP scheme, and was intended to to help struggling businesses keep employees on their payroll and stay afloat during the pandemic.
The investigation also found that "Beefy King," a fake cattle ranch registered in New Jersey, filed for a $20,567 loan. The money was registered to the address of Joe Mancini, mayor of Long Beach Township, who denied any knowledge of the application.
"There's no farming here: We're a sandbar, for Christ's sake," Mancini told ProPublica on the phone.
ProPublica checked New Jersey business records for the farms and found that none of them existed. Hundreds of PPP applicants across 28 states didn't show up in state registration records, and other lenders had nonexistent businesses on their books too, not just Kabbage, ProPublica reported.
The story is part of a wider problem: The Small Business Administration, which connects business owners to lenders, estimated in January that it approved loans for 55,000 potentially ineligible businesses, and that 43,000 received more money than needed for their payrolls.
ProPublica started investigating the loans after a New Jersey resident got in contact, saying his name was attached to a Kabbage loan linked to a "melon farm."
The lender, which American Express acquired in August last year, processed nearly 300,000 loans in the first round of PPP funding, according to ProPublica.
"At any point in the loan process, if fraudulent activity was suspected or confirmed, it was reported to FinCEN, the SBA's Office of the Inspector General and other federal investigators, with Kabbage providing its full cooperation," Kabbage spokesman Paul Bernardini told ProPublica in an emailed statement.
Kabbage did not immediately respond to Insider's request for comment.