How Much Prison Time for a $20,000 PPP Loan Fraud?

Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience defending federal fraud cases. If you fraudulently obtained a $20,000 PPP loan and you’re wondering whether you’ll actually go to prison – the answer is probably yes. People think small PPP fraud cases get probation. They’re wrong.

The Cincinnati Case Everyone Should Know About

Kelton McClarrin from Cincinnati applied for a PPP loan in May 2021. He falsely claimed he owned a business established in 2019 with $100,000 in gross income. He submitted a forged bank statement. He got approved for $21,000.

What did he do with the money? CashApp, Grubhub, DoorDash, Facebook purchases, hotels and jail commissary services. Not payroll, not rent, not business expenses – personal spending.

He got caught in 2023. Pleaded guilty in October 2023. On March 5, 2025, U.S. District Judge Douglas R. Cole sentenced him to 18 months in federal prison.

Eighteen months. For $21,000. That’s the reality of PPP fraud sentencing in 2025.

Why Small Cases Still Result in Prison Time

Federal judges used to show leniency in PPP fraud cases, particularly early in the pandemic. Not anymore. Defendants sentenced in 2024-2025 receive prison terms 40% longer on average than those sentenced in 2021-2022 for the same conduct.

The Department of Justice views PPP fraud as theft from American taxpayers during a national emergency. They’re not interested in probation for defendants who lied to get pandemic relief money while legitimate businesses struggled.

Here’s what defense attorneys proposed in the Cincinnati case: probation without jail time because the intended loss was “only” $20,000. The judge rejected that argument. He sent the defendant to federal prison anyway.

Judges Look at How You Spent the Money

McClarrin’s spending pattern hurt him badly. He didn’t even pretend to use the money for business purposes. DoorDash and jail commissary? That’s pure personal spending – and it showed the judge he had zero remorse or understanding of what he’d done.

If you spent your fraudulent PPP money on a luxury car, jewelry, vacations or gambling, expect the judge to hammer you at sentencing. Courts view lavish spending as evidence of greed rather than necessity, which translates to longer sentences.

Even if you spent the money on rent and groceries, you’re not getting sympathy if you lied about having a business in the first place. The fraud is the fraud – how you spent the money just determines whether the judge thinks you’re entitled to any leniency.

The Federal Sentencing Guidelines for $20,000 Fraud

Federal judges calculate sentences using the United States Sentencing Guidelines. For fraud cases, the base offense level starts at 6 or 7, then increases based on the loss amount.

A loss between $15,000 and $40,000 adds 4 levels to your base offense level. That puts most $20,000 PPP fraud defendants at an offense level around 10-12 before any other adjustments.

If you played a leadership role in the fraud, add 2-4 levels. If you used sophisticated means, add 2 levels. If you obstructed justice or lied during the investigation, add 2 levels. On the other hand, if you accept responsibility by pleading guilty early, you can subtract 3 levels.

For a first-time offender with no criminal history and a $20,000 loss who pleads guilty, the guidelines typically recommend 6-12 months in federal prison. But judges can and do go above that range – particularly if the spending was egregious or if you initially lied to investigators.

When $20,000 Cases Result in Longer Sentences

Some $20,000 PPP fraud cases result in sentences longer than 18 months. Why? Multiple applications.

If you submitted three fraudulent PPP applications for $20,000 each, the loss calculation becomes $60,000 – not $20,000. That pushes you into a higher sentencing range and demonstrates a pattern of fraud rather than a one-time mistake.

Identity theft also triggers longer sentences. If you used someone else’s Social Security number or EIN on your application, you’re facing a mandatory consecutive two-year sentence under 18 USC §1028A. That two years runs on top of whatever you get for the fraud itself, and judges have almost no discretion to reduce it.

Money Laundering Charges Add Years

Prosecutors sometimes charge money laundering when defendants move PPP funds between accounts or make large cash withdrawals. Money laundering under 18 USC §1956 carries up to 20 years per count.

Most $20,000 cases don’t get charged with money laundering unless there’s evidence of sophisticated concealment efforts. But if you structured transactions to avoid reporting requirements, moved money offshore or used shell companies – even in a relatively small case – you could face money laundering charges that dramatically increase your prison exposure.

Can You Avoid Prison in a $20,000 Case?

Possibly – but don’t count on it. Your best chances involve substantial cooperation with the government, full restitution before sentencing and genuine acceptance of responsibility.

If you’re the first person to report a larger fraud scheme and you provide substantial assistance that leads to other prosecutions, the government may file a 5K1.1 motion asking the judge to sentence you below the guidelines. We’ve seen defendants avoid prison through cooperation – but it requires providing information the government doesn’t already have.

Paying back the full $20,000 before sentencing won’t guarantee probation, but it demonstrates remorse and eliminates the restitution issue. Judges view early repayment favorably – it’s one of the few things defendants can do to improve their sentencing position.

First-time offenders with sympathetic personal circumstances sometimes get probation in $20,000 cases, but it’s rare. You need a compelling story – serious medical issues, primary caretaker of young children, genuine business that failed during the pandemic – and even then, many judges still impose at least some prison time.

Federal Prison Means Real Time

There’s no parole in the federal system. If you get 18 months, you’re serving roughly 15 months before release. Federal Bureau of Prisons inmates serve at least 85% of their sentence.

You’ll likely go to a federal prison camp – the lowest security level – if you have no violent criminal history and the judge recommends it. Prison camps don’t have cells or fences, but you’re still in federal custody. You can’t leave, you can’t have contact visits with your family without supervision, and you’re living with other federal inmates.

Why You Need Experienced Counsel Now

At Spodek Law Group, we’ve handled federal fraud cases for over 40 years. Todd Spodek represented Anna Delvey in the trial that became a Netflix series – a case involving alleged fraud against some of New York’s elite institutions. Our team includes former federal prosecutors who understand how the government builds these cases and what it takes to negotiate favorable outcomes.

If you’re under investigation for PPP fraud – even a relatively small amount like $20,000 – contact us immediately. Early intervention matters. We can negotiate with prosecutors before charges are filed, potentially reducing your exposure or getting into a diversion program. Once you’re indicted, your options narrow considerably.

The Cincinnati defendant probably thought $21,000 wasn’t serious enough for prison time. He was wrong, and now he’s serving 18 months in federal custody. Don’t make the same mistake.