Los Angeles PPP Loan Fraud Lawyers.

On February 6, 2026, the SBA suspended 111,620 California borrowers in a single announcement, tied to 118,489 PPP and EIDL loans and over $8.6 billion in suspected fraud. The pages competing with this one are still writing about FBI agents and the Encino fraud ring, and if your business used fake identities to take 150 loans, those pages describe your problem. If your business is real, your problem is a list. Nobody called first.

What the suspension does

A suspended borrower cannot take a new SBA loan and cannot participate in 8(a) federal contracting. Now, the penalty lands before anyone reviews your file individually, and the scale says why. The SBA's own April release said fewer than 1,000 of the 562,000 borrowers it referred nationwide had ever been investigated by its inspector general, and no office reviews 111,620 Californians in a winter. The software did the selecting, the SBA says it runs that software with Palantir, and dividing the announcement's own numbers puts the average suspended loan at $73,000, give or take. That number describes shops, contractors, and restaurants.

The Administrator announced it standing at a San Diego address she said was registered to 14 businesses that took $2 million, and to be fair, that address sounds like a real problem. It also tells you nothing about the other 111,619. The SBA has not published the California list, and we have not found a way, for now, to look a name up before the letter arrives.

A suspension can be contested, and the release says the agency is coordinating further review, so the letter starts a process rather than ending one. For most borrowers the stakes are future credit. For an 8(a) contractor the letter reaches work already bid, and the response you send can be read later by a different office. We write those with the second reader in mind.

The Encino template

The reason every Los Angeles PPP page talks about agents is one family. Richard Ayvazyan, Marietta Terabelian, and their relatives in Encino ran the case that built the template: roughly 150 PPP and EIDL applications on dozens of fake, stolen, or synthetic identities, more than $20 million, down payments on houses in Tarzana, Glendale, and Palm Desert. Convicted at trial in June 2021. They cut their ankle monitors that August, were sentenced in absentia to 17 and six years, turned up in Montenegro, and came back through LAX in November 2022. The jury ordered forfeiture, though: bank accounts, jewelry, gold coins, three houses.

Measure your file against that. The template is identities that do not exist and businesses that never operated. Still, a real company with one loan, real payroll, and a bank account in its own name does not fit it, and what is running now is the list, or really the referral machine behind it, and, for eligibility mistakes, the civil False Claims Act.

The letter and the money

The way this usually reaches a person is not a phone call or a visit but an envelope that looks like every other envelope the government sends, opened on a Tuesday over a counter, read twice, and set down next to the register. On April 24 the SBA referred 562,000 flagged loans, $22.2 billion, to the Treasury for collection and sent the same list to the Justice Department. A California borrower suspended in February should assume the April list includes them, though the SBA has not said how the two lists relate. The rest runs on the calendar. At 120 days past due the debt can enter the Treasury Offset Program and your tax refund, some federal payments, and some Social Security get taken before they reach you; at 180 days cross-servicing adds wage garnishment with no court order and private collection agencies, all required by statute at 31 U.S.C. 3711, so no person at the agency decides to do it to you. The calendar does. For most of the 562,000 the government wants money, collections is near certain, and a case is rare.

Be careful what you write back. A dispute that explains your ownership or your employee count to argue eligibility puts the answer to the application's hardest questions in writing, in a file an agency shares. Dispute the amount if the amount is wrong, and leave the eligibility argument out. The letter also means, again, that your loan sits on a list at Justice, opened or not.

If a case comes, it will be civil

The civil PPP cases against operating businesses in 2026 turn on eligibility, not spending: whether the second-draw application counted affiliates, whether a twenty-percent owner was listed, whether the same company answered the same question differently in 2020 and 2021. The settlements we have watched this year ran at roughly half of trebled damages, and the arithmetic, the cases, and the cooperation-credit math are on our federal PPP page. The civil standard, however, is knowing, and knowing includes not checking. If you own more than one entity, the government reads your 2020 application next to your 2021 application, and whatever changed between them is the case.

What we do

First we sort which track the letter belongs to, because a suspension notice, a Treasury demand, and a civil investigative demand cannot get the same reply. Then the ownership map as of the loan date, then the two applications side by side, field by field. If they match and the counts were right, the response is short, with exhibits. If they do not, we want to know first, and at some point before anyone writes to any agency we have the self-disclosure conversation, and its price.

A $40,000 loan, clean payroll, one entity: that is usually a debt, and we will say so in the first call. Either way you will hear it plainly, and again: do not amend the forgiveness application after a letter, and do not explain your structure to a collections agent. Find the 2020 application, then call. Attorney on call, 24/7. The number is at the top of the page.