FEDERAL CRIMINAL LAWYERS

Can You Go to Jail for a $20,000 PPP Loan?

You took $20,000. Maybe $25,000. Maybe less. The amount felt small enough to fly under the radar. Federal prosecutors have bigger fish to fry, right? Multimillion-dollar schemes. Organized fraud rings. Surely they won’t bother with your loan.

Welcome to Spodek Law Group. Our goal is to destroy a dangerous illusion that’s keeping people from protecting themselves: there is no “too small to prosecute” threshold for PPP fraud. Kelton McClarrin took $21,000 – less than what most people spend on a used car. His defense attorneys argued for probation because the amount was “only” $20,000. The judge rejected that argument completely. McClarrin got 18 months in federal prison. Not probation. Not house arrest. Federal prison for an amount that wouldn’t cover a year’s rent in most cities.

That’s the reality that most legal websites won’t tell you straight. They’ll explain the statutes. They’ll list the maximum penalties. But they won’t show you the case where a $21,000 fraud got someone almost two years behind bars. The amount you stole doesn’t determine WHETHER you go to prison. It only affects HOW LONG you stay there. And even that calculation isn’t what most people expect – because 2025 sentences are running 40% longer than identical frauds received in 2021.

The $21,000 Illusion

Heres the myth that keeps people awake at night but also keeps them from acting. People beleive small PPP loans exist in some protected category. They think prosecutors are too busy with the $5 million schemes to bother with their $20,000 loan. They assume there’s a minimum threshold – some cutoff below which the federal goverment just dosent care.

That assumption is wrong. And its dangerous becuase it stops people from getting legal help when they still have options.

Kelton McClarrin of Cincinnati applied for a PPP loan on May 16, 2021. He claimed to be the sole owner of a buisness called “Kelton McClarrin.” He said the buisness was established in 2019 with gross income of $100,000. He submitted a forged bank statement. The loan was approved. He recieved $21,000.

Then he spent it on jail commissary services, CashApp, Grubhub, DoorDash, Facebook purchases, and hotels. Every single transaction was tracable. Every single dollar was documented. When federal investigators came looking, the case was trivially easy to prove. There was no complexity. No question about intent. No ambiguity about were the money went.

His defense attorneys made the obvious argument: this was a small fraud. Only $20,000. The defendant should recieve probation, not prison. The loss to the goverment was minimal compared to the multi-million dollar schemes making headlines.

The judge rejected that argument and sentenced McClarrin to 18 months in federal prison.

Think about what that means for your case. If your sitting there with a $20,000 PPP loan, telling yourself the amount is too small to matter – your looking at the same sentencing enviroment that put McClarrin away for a year and a half. The amount didnt save him. It wont save you.

Why “Small” Doesn’t Mean “Safe”

OK so lets talk about what actualy determines wheather you get prosecuted. The answer isnt the dollar amount. Its provability.

Prosecutors have complete discretion over which cases to bring. Theres no formal minimum threshold in federal law. The IRS, FBI, and SBA do prioritize investigation of loans over $2 million – but that dosent mean they ignore smaller amounts. It means they START with the big ones. Once they have evidence of fraud at any amount, they prosecute.

Heres the inversion that nobody wants to hear: small frauds are often EASIER to prosecute then large ones. A $20 million scheme has layers. Shell companies. Multiple participants. Complex money flows. It takes months or years to untangle. A $20,000 fraud where you spent the money on DoorDash and hotels? That case writes itself. The bank records tell the whole story. There’s nothing to argue about.

The factors that actualy determine prosecution have nothing to do with amount:

Provability: Can they document the fraud with paper trails? If you spent PPP money on tracable personal expenses, the answer is yes.

Egregriousness: Did you do something particulary offensive? Using the money for gambling, luxury purchases, or other conspicous spending catches attention.

Document Fabrication: Did you forge bank statements, create fake employees, or fabricate tax returns? That elevates the seriousness regardless of amount.

Aggravating Conduct: Did you lie to investigators when questioned? Did you try to cover up the fraud? Obstruction adds levels to your sentence.

Todd Spodek has represented clients facing federal fraud charges for years. The cases that get prosecuted aren’t necessarily the biggest – their the ones were the goverment has an easy path to conviction. A $20,000 fraud with clear evidence beats a $200,000 fraud were the facts are murky. Prosecutors want wins, not necessarily headlines.

Kelton McClarrin: 18 Months for Less Than a Honda Civic

Lets look at this case in detail becuase it reveals everything about how small PPP frauds get sentenced in 2024-2025.

McClarrin was 33 years old when he applied for his PPP loan. He created a fictional sole proprietorship using his own name. He claimed $100,000 in gross income from a buisness that apparently didnt exist. He submitted forged bank statements to support the application. The loan was approved and he recieved aproximately $21,000.

The money went to personal expenses – and not just any personal expenses. Jail commissary services. That detail is remarkable. He was apparently already involved with the criminal justice system and used pandemic relief funds for commissary purchases. The rest went to CashApp transfers, food delivery apps, Facebook purchases, and hotels.

Heres the thing about that spending pattern. Every transaction left a record. CashApp maintains logs. DoorDash has receipts. Hotels have check-in records. When investigators subpeonaed his bank records, the entire fraud was laid bare in black and white. There was no ambiguity. No legitimate buisness expenses mixed in. Just personal spending, fully documented.

His defense team made the arguments you’d expect. The amount was small. He should recieve probation. The loss to the goverment was minimal. First-time offender considerations should apply.

U.S. District Judge Douglas R. Cole wasnt persuaded. He sentenced McClarrin to 18 months in federal prison for wire fraud. Not probation. Not home confinement. Prison.

At Spodek Law Group, we track these cases closley becuase they reveal were the judiciary is heading. The McClarrin sentence signals that judges are done with leniency for small frauds. The “its only $20,000” argument dosent work anymore. It might have worked in 2021 when judges were still processing the pandemic’s chaos. In 2025, it gets you 18 months.

The Calculator That Determines Your Sentence

The math that converts dollars to months lives in Federal Sentencing Guidelines § 2B1.1. This is the formula that actualy determines how long you’ll serve – not the statutory maximums that scare everyone.

Heres how loss amount affects your offense level:

• Loss under $6,500: Base level 6
• $6,500 to $15,000: Add 2 levels
• $15,000 to $40,000: Add 4 levels
• $40,000 to $95,000: Add 6 levels
• $95,000 to $150,000: Add 8 levels

A $20,000 fraud falls in the $15,000 to $40,000 range. That adds 4 levels to your base offense level. Combined with a base level of 7 for fraud, your looking at offense level 11.

For a first-time offender with no criminal history at offense level 11, the sentencing guidelines recommend 8-14 months in federal prison. Thats the starting point. Add enhancements for sophisticated means (forging documents), abuse of trust, or obstruction – and the number climbs.

But heres what the guidelines dont tell you. Judges in 2024-2025 are sentencing ABOVE the guidelines range in PPP fraud cases. The 40% increase in sentence length compared to 2021-2022 isnt becuase the guidelines changed. Its becuase judges are using there discretion to go higher. The political pressure to punish pandemic fraudsters has filtered down to the federal bench.

McClarrin’s 18 months for a $21,000 fraud is above what the pure guidelines calculation would suggest. The judge could have given 8-14 months under the guidelines. Instead, he gave 18. That gap between guidelines and actual sentence is the new normal.

The loss amount table is just the starting point – judicial discretion determines were you actualy land, and that discretion is running harsh.

What Actually Determines Whether You’re Prosecuted

The goverment dosent prosecute every PPP fraud they discover. They cant – there are too many. So what makes the difference between a case that gets charged and one that dosent?

Evidence Quality: The cleaner the paper trail, the more likely prosecution. If you spent PPP money through tracable channels – bank transfers, credit cards, CashApp, Venmo – every dollar is documented. Cases with clear evidence are prioritized becuase their easier to win.

Spending Pattern: What you spent the money on matters. Legitimate-looking buisness expenses mixed with personal use creates ambiguity. Pure personal spending on luxury items or gambling screams fraud. McClarrin spent his on DoorDash and jail commissary – there was no legitimate buisness purpose to even argue.

Document Fabrication: If you forged bank statements, created fake employees, or fabricated tax returns, the intent element is proven by the fabrication itself. You cant accidentally forge a document. Fabrication cases are almost guarenteed prosecution.

Cooperation or Obstruction: How you respond to investigation matters. Lying to FBI agents adds a false statements charge. Destroying documents adds obstruction. Both increase your sentence significantly. Cooperating early – before charges – can sometimes prevent prosecution entirely.

Criminal History: First-time offenders recieve more leniency in charging decisions. If you have prior convictions, especialy for fraud or dishonesty, prosecutors are more likely to bring charges and seek higher sentences.

Amount + Egregriousness Combined: While amount alone dosent determine prosecution, amount combined with egregious conduct does. A $20,000 fraud spent on food delivery is bad. A $20,000 fraud spent while you were allready on probation is worse. Context amplifies or diminishes the goverment’s interest.

The DOJ has stated publicly that their pursuing PPP fraud cases of all sizes. The press releases feature the big numbers – $11 million schemes, $20 million rings – but the actual prosecution docket includes thousands of small cases that never make headlines. Your $20,000 fraud can absolutley be one of them.

And heres something else that matters. The statute of limitations for PPP fraud was extended to 10 years by Congress specificaly to ensure pandemic fraudsters dont escape prosecution. If you took a fraudulent loan in 2020, federal prosecutors have until 2030 to bring charges. Loans from 2021 can be charged until 2031. The assumption that time will make this go away – that they’ll eventualy move on to other priorities – is dangerously wrong. The goverment has given itself a decade-long window to pursue every provable case, including yours.

2025 vs 2021: Why Timing Destroys You

Early in the pandemic, federal judges showed something resembling mercy. The chaos of 2020. The confusion over PPP rules. The desperation of small buisness owners. Some judges factored that context into sentencing, giving probation or home confinement where guidelines called for prison.

That era is completley over.

Defendants sentenced in 2024-2025 recieve prison terms 40% longer on average then defendants sentenced in 2021-2022 for identicle conduct. Same dollar amounts. Same fraud patterns. Dramatically different outcomes based purely on when the sentence was imposed.

Think about what that means if your still in the investigation phase. If you took a fraudulent PPP loan in 2020 or 2021 and havent been charged yet, your going to be sentenced in the harsh enviroment, not the lenient one. The statute of limitations was extended to 10 years – your 2020 loan can be charged until 2030. If charges come in 2026 or 2027, you’ll be sentenced by judges who have fully absorbed the political pressure to punish pandemic fraud.

The judges who showed leniency in 2021 are now among the harshest. Its the same judiciary, completley different approach. The initial sympathy for pandemic desperation has been replaced by frustration with the scale of the fraud. Judges have seen hundreds of these cases now. Their patience is exhausted.

Every month you delay getting legal counsel is a month closer to sentencing in an increasingly hostile judicial enviroment. The window for mercy closed years ago.

The Small Loan Trap: How It Makes Your Case Worse

Heres something counterintuitive that works against people with small PPP frauds. The very thing that makes you feel safe – the small amount – actualy weakens your negotiating position.

When prosecutors have a defendant facing charges for $5 million in fraud, theres room to negotiate. Maybe they cooperate against co-conspirators. Maybe they provide information about the larger scheme. Maybe they pay back a substantial portion and earn credit for that. The size of the fraud creates leverage for both sides.

With a $20,000 fraud, what do you have to offer? You probly acted alone. There are no co-conspirators to flip on. The amount is too small for “substantial assistance” to mean much. Your options for cooperation are limited becuase your case is simple.

That simplicity cuts both ways. Its bad for prosecution prioritization – maybe they have bigger cases to worry about. But its also bad for plea negotiation – once they decide to charge you, the case is straightforward and their not hungry for your cooperation.

Todd Spodek and the attorneys at Spodek Law Group have seen this dynamic play out repeatedly. Clients with small frauds often get WORSE plea offers then clients with large frauds who can provide valuable cooperation. The large fraud defendant might get 50% off their sentence for substantial assistance. The small fraud defendant has nothing to trade.

The psychological trap is this: the small amount makes you feel safe, so you dont prepare. You dont get counsel. You dont think about cooperation options. Then when charges come, your caught flat-footed with fewer options then you would have had with a larger fraud.

Defense Options When You Took “Only” $20,000

Despite everything above, defense options do exist. The key is acting before your options close.

Early Intervention: Getting counsel involved during the investigation phase – before charges – gives maximum flexibility. Your attorney can sometimes influence what charges appear in the indictment, wheather enhancements apply, and how cooperatively the case proceeds. Once the indictment is filed, many options disappear.

Acceptance of Responsibility: Pleading guilty early and demonstrating genuine acceptance can reduce your offense level by up to 3 levels. That can translate to 30% less prison time. But the timing matters enormously – waiting until trial is imminent eliminates most of this credit.

Cooperation Credit: Even with a small fraud, some cooperation options exist. If you have information about other frauds, other participants, or systemic issues, prosecutors might be interested. The earlier you present this option, the more valuable it is.

Voluntary Disclosure: In rare cases, approaching the goverment before their aware of your fraud can result in more favorable treatment. This requires extremely careful handling by experienced counsel – done wrong, your simply confessing to a crime. Done right, it demonstrates the rehabilitation and honesty that judges credit.

Restitution: Paying back the money dosent make the crime disappear, but it affects sentencing. Full restitution before sentencing demonstrates acceptance and reduces the loss figure that drives the guidelines calculation. If you have the ability to repay $20,000, doing so through counsel can affect your outcome.

Mitigation Package: A comprehensive sentencing memorandum that presents your personal history, circumstances, rehabilitative efforts, and character evidence can persuade judges to go below guidelines. This requires extensive preparation and is only effective with experienced federal defense counsel.

The Window Is Closing: Perhaps most important – every day you wait is a day closer to charges being filed. Once an indictment comes down, your options narrow dramaticaly. Before charges, theres room to negotiate, to cooperate, to influence the goverments approach. After charges, your playing defense from a weaker position. The time to act is now, not when marshals appear at your door.

Spodek Law Group has handled federal fraud cases for decades. We understand the difference between clients who prepared and clients who hoped the problem would disappear. The outcomes are dramatically different. A $20,000 fraud with proper legal strategy might result in probation or minimal prison time. The same fraud without preparation results in 18 months like McClarrin.

Call us at 212-300-5196 before you make any decisions about how to handle your situation. The consultation is free. The mistake of waiting until charges are filed is expensive – measured in months or years of your life.

Your “small” PPP loan dosent make you safe. It makes you prosecutable. The only question is wheather you prepare for that reality or pretend it dosent exist until marshals are at your door.