What is Loan Stacking PPP Fraud?

What is Loan Stacking PPP Fraud?

Welcome to Spodek Law Group. We handle federal criminal defense matters, and we’ve watched prosecutors build devastating cases against business owners who thought they were being smart – applying to multiple banks for PPP loans, hedging their bets, maximizing their chances of getting approved. What felt like good strategy in April 2020 is now looking like federal prison in 2025.

Here’s the reality nobody explained about PPP applications: every submission was a separate federal crime waiting to happen. You thought applying to Bank A, Bank B, and Bank C improved your odds. What you actually did was create three separate wire fraud counts. Each application transmitted false certifications across interstate wires. Each transmission is a count. The diversification that felt protective was actually multiplying your criminal exposure.

The trap wasn’t getting multiple approvals. The trap was submitting multiple applications. Borrowers who took a second loan within 15 days were four times more likely to be fraudsters. A third loan? Ten times more likely. That’s not opinion – that’s Wall Street Journal research on the statistical patterns the government uses to identify loan stacking. Your “backup plan” applications created the exact fingerprint investigators use to find you.

What Loan Stacking Actualy Means

The PPP rules were clear on one point that alot of applicants missed: each business could receive only one PPP loan. One business, one loan. Thats it. The program wasnt designed for business owners to shop around and accept multiple deposits. It was designed to provide one lifeline per business.

Loan stacking means exactly what it sounds like – stacking multiple PPP loans on top of each other. You apply to Bank A and Bank B simultaneously. Both approve. Both deposit money. Now youve got two loans for the same business, and youve committed federal fraud. The stacking doesnt have to be successfull to be criminal. The applications themselves are the crime.

Heres why so many people fell into this trap: the chaos of April 2020 made loan stacking feel reasonable. Banks were overwhelmed. Applications were getting lost. The first round of funding – $349 billion – ran out in 13 days. Business owners panicked. They submitted applications to multiple lenders because they didnt know if any would come through. The desperation was real. But desperation isnt a defense to wire fraud.

The rules prohibited applying to multiple lenders for the same business purpose. If you applied to Bank A for $100,000 in payroll support, you couldnt simultaneously apply to Bank B for the same thing. But many business owners did exactly this – submitting identical applications to different lenders, hoping atleast one would approve before the money ran out.

The problem wasnt the approval. The problem was the application. Each submission transmitted false certifications – because you certified you werent applying elsewhere. Each transmission is wire fraud. Whether you received one loan, two loans, or zero loans, the applications themselves created your criminal exposure.

The EIN That Connected Everything

Your Employer Identification Number appeared on every PPP application you submitted. Different banks. Different lenders. Different states. Dosent matter. That 9-digit number was on every form. And every form went to databases that would eventualy be cross-referenced.

Heres what applicants didnt understand: the PPP wasnt actually decentralized. Banks processed applications, but the SBA received data on all of them. Every lender submitted every application to centralized systems. Your “different banks” strategy was always feeding the same database. The anonymity you assumed never existed.

The cross-referencing is automatic now. The Pandemic Analytics Center of Excellence – PACE – matches EINs across the entire PPP dataset. Your EIN appears on applications at three different banks? Flagged. Your business received deposits from two different lenders? Flagged. No human needs to notice the pattern. The algorithm already identified you.

Heres the thing that kills most defendants: they thought chaos meant nobody was watching. Banks were approving applications in hours. The SBA was just trying to get money out the door. Everything felt rushed and disorganized. That chaos created false confidence. It felt like nobody would ever check the details.

But behind the scenes, the government was building databases. Storing every application. Recording every EIN. Cross-referencing every deposit. The speed of approval in 2020 became the precision of investigation in 2024. The chaos didnt protect you. It just delayed the reckoning.

Heres what the matching systems actually look for: not just identical EINs, but similar names with different EINs. Matching addresses across different business entities. The same bank account receiving deposits from multiple PPP loans. Investigators dont just catch exact duplicates – they catch attempts to disguise duplicates. If you changed your business name slightly, or used a DBA instead of your LLC, or listed a different address, the algorithms still connect those applications to you. The variations you thought would create separation actually created additional evidence of intent to defraud.

The 15-Day Statistical Fingerprint

Wall Street Journal research revealed something prosecutors now use routinly: the timing of loan applications creates a statistical profile of fraud likelihood. Borrowers who took a second loan within 15 days of the first were four times more likely to be fraudsters. A third loan within that window? Ten times more likely.

Think about what this means. The goverment doesnt need to investigate your specific intentions. They dont need to prove you knew the rules. They just need to show your pattern matches the fraud profile. Applied to four banks in the same week? Statistically, your probly a fraudster. Thats not proof beyond reasonable doubt by itself, but its enough to open an investigation.

The 15-day window exists because thats how credit reporting lags work. When you apply for a loan, it doesnt immediatly appear on your credit file. Fraudsters exploit this gap – submitting multiple applications before any of them show up. By the time the first loan is formally reported, there already approving the second and third.

Experian sells a product called “Temporary Account Record” specificaly designed to catch this. It detects pending loans before there formally reported – in the crucial first 30 days when stacking happens. The credit bureaus arent just tracking you. There selling the ability to catch you to lenders who want to cooperate with investigators.

Heres the brutal reality: the pattern that felt like hedge-your-bets strategy was actualy the statistical fingerprint the goverment uses to identify you. You didnt diversify your chances. You created the exact profile that flags you as a probable fraudster.

Each Application Is a Seperate Crime

This is the part most defendants dont understand until discovery: you dont need to receive money to commit PPP fraud. The application itself is the crime. When you submitted that application through an online portal, you transmitted false statements across interstate wires. Thats wire fraud. 20 years per count.

Let that sink in. You could have applied to four banks, been rejected by all four, never received a single dollar – and still face four counts of wire fraud. The transmission is the crime. The certification was false because you said you werent applying elsewhere. Each false certification transmitted electronically is a seperate federal offense.

The charge stacking is intentional. Prosecutors dont just pick one application and ignore the rest. They charge wire fraud for every submission. Applied to three lenders? Three counts. Applied to five? Five counts. Each carries up to 20 years. Even if you only face sentancing on one count, the others provide leverage for plea negotiations and enhance the calculation if you go to trial.

Heres where it gets worse: if any of those applications resulted in money being deposited, now you have bank fraud too. Bank fraud under 18 USC 1344 carries up to 30 years. So your three applications might become three wire fraud counts plus two bank fraud counts – thats five federal charges before prosecutors even look at money laundering or conspiracy.

The Texas couple who used one active business and three dormant entities to submit six PPP applications learned this the hard way. Five of there applications were funded, totaling approximately $3 million. Sentance: combined 32 years in federal prison. Each application, each business, each deposit – it all stacked into decades of incarceration.

How There Catching Stacking Schemes Now

The investigative infrastructure has matured dramaticaly since 2020. What started as chaos has become systematic enforcement. The DOJ COVID-19 Fraud Enforcement Task Force has over 700 active cases. There not rushing. There building cases methodicaly using data that was collected years ago.

The PACE center provides investigative support using algorithms that cross-reference every aspect of PPP applications. EIN matching. Bank account matching. Owner name matching. Address matching. If you applied to multiple lenders with slightly varied information – maybe you changed your business address or used a different spelling of your name – the algorithms still connect the dots.

Banks cooperate aggressivly. The institutions that approved your loans are now handing over every document investigators request. They want to avoid there own liability. When the FBI shows up with subpoenas, banks dont protect borrowers. They protect themselves by providing complete cooperation.

Heres an example of how this plays out: Kabbage Inc., the fintech company that processed PPP loans in hours, faced a $120 million DOJ judgment. There accused of systematicaly inflating loans and failing to implement fraud controls. The company that approved your loan so quickly might now be cooperating with investigators to reduce there own exposure.

The statute of limitations was extended to 10 years in 2022. President Biden signed two laws – the PPP and Bank Fraud Enforcement Harmonization Act and the COVID-19 EIDL Fraud Statute of Limitations Act – that pushed the prosecution window through 2030 for loans originated in 2020. The government has time. There using it to build comprehensive cases instead of rushed ones.

Theres another threat most stacking defendants dont consider: whistleblowers. The False Claims Act allows private citizens to file lawsuits on behalf of the government – called qui tam actions – and collect 15-30% of whatever the government recovers. A former business partner who knows you applied to multiple banks can report the fraud and potentially receive millions. An ex-employee who remembers processing multiple applications can file a qui tam complaint. Your former bookkeeper who left on bad terms? She might remember exactly which lenders you applied to. The government doesnt need to find you through algorithms. Someone with a grudge might hand them your case.

What Federal Prosecutors Actualy Charge

When you stacked PPP loans, you potentialy triggered a cascade of federal charges. Prosecutors stack charges the same way you stacked loans – and there much better at it.

Wire fraud under 18 USC 1343 applies to each electronic transmission. Every online application. Every email confirmation. Every electronic signature. Each can be a seperate count carrying up to 20 years – or 30 years if the fraud affected a financial institution.

Bank fraud under 18 USC 1344 applies when you made false statements to obtain funds from a federaly insured bank. This carries up to 30 years per count. If you stacked loans from two banks, thats potentially two bank fraud counts on top of your wire fraud counts.

Making false statements to the SBA under 18 USC 1014 also carries 30 years. And conspiracy charges under 18 USC 371 or 18 USC 1349 can add years when prosecutors argue the stacking itself constituted a scheme.

Money laundering applies when you moved the fraudulently obtained funds around. Transfer money between accounts? Money laundering. Buy property? Money laundering. Pay off debts? Money laundering. These charges stack on top of everything else.

Meelad Dezfooli of Nevada submitted three fraudulent applications obtaining more then $11 million in PPP loans. He laundered the money through real estate purchases and gambling. Sentance: over 15 years in prison. Restitution: $11.2 million. The three applications became a multi-decade prison term.

A bank manager who organized a conspiracy for 38 fraudulent PPP loans totaling approximately $5 million recieved 65 months. He didnt just stack his own loans – he helped others stack theirs. The facilitation of stacking became its own crime.

The “I Was Just Hedging” Defense

Intent matters in federal fraud prosecutions. The goverment needs to prove you knew your conduct was wrong and proceeded anyway. Some defendants try to argue they were just trying to get approved somewhere – that the multiple applications were desperation, not fraud.

Heres when that defense might work: if you genuinely applied to multiple banks uncertain weather any would approve, and immediately returned funds when you realized you received duplicates, and documented your confusion in real-time through emails with your accountant or banker, you might have a viable good-faith defense.

Heres when it definately wont work: if you applied to six banks, kept all the money, bought a Lamborghini, and only expressed “confusion” after investigators showed up. Juries dont believe desperation when the defendant is driving a luxury sports car.

The pattern matters. If you applied to Bank A on Monday and Bank B on Tuesday, thats one thing. If you applied to Banks A, B, C, D, and E all on the same afternoon, thats a pattern that looks like deliberate stacking rather then confused hedging.

Documentation matters more. Emails asking your accountant whether its okay to apply to multiple banks. Notes from conversations with your loan officer about PPP rules. Evidence that you genuinely didnt understand the single-loan restriction. Without documentation, your confusion defense is just your word against the statistical profile of fraud.

Some defense attorneys have won acquittals in stacking cases. The successful defenses share common elements: contemporaneous documentation of confusion, immediate return of duplicate funds, cooperation with investigators once the issue was discovered, and consistent explanations from day one. The “I was confused” defense only works when the confusion is documented – not just claimed.

Heres what happens if you go to trial on stacking charges: the government presents a simple timeline. Application to Bank A on this date. Application to Bank B the next day. Application to Bank C that same week. Money deposited from two sources. No return of either deposit. The jury sees dates and dollar amounts. They dont see your internal confusion. They see a pattern that looks exactly like calculated fraud. Unless your defense has concrete evidence showing you didnt understand the rules, the timeline tells the story prosecutors want it to tell.

What To Do If You Applied to Multiple Lenders

If your reading this because your worried about PPP applications you submitted to multiple banks, heres what you need to understand: the goverment probly already knows. The cross-referencing happened automaticaly. Your EIN appeared on multiple applications. The question isnt weather they know – its weather your file has moved from “flagged” to “active investigation.”

First, do not talk to investigators without an attorney present. Period. The instinct to “explain” your multiple applications is how people turn stacking cases into obstruction cases. Every word you say becomes a 302 report. Any inconsistancy – even accidental – can become a false statements charge under 18 USC 1001. Martha Stewart didnt go to prison for insider trading. She went for lying to investigators.

Second, do not repay duplicate loans thinking that solves the problem. Repayment doesnt eliminate criminal liability. Worse, prosecutors can argue repayment demonstrates “consciousness of guilt” – that you knew the stacking was wrong. Your trying to fix the problem becomes evidence of the problem.

Third, find a federal criminal defense attorney who handles PPP fraud specificaly. This isnt a general practice area. The stacking detection methods, the charging patterns, the statistical profiling the goverment uses – these require specialized knowlege. At Spodek Law Group, Todd Spodek and our team have defended clients facing exactly these charges. We understand how algorithms flag patterns, how prosecutors build stacking cases, and what defenses actualy work.

Fourth, preserve every document related to your PPP applications. Emails with your bank. Guidance you received from your accountant. Communications about whether multiple applications were permissible. These documents may be crucial for demonstrating good faith confusion. But – and this is critical – do not organize or review these documents without counsel.

The 10-year statute of limitations means 2020 applications can be prosecuted through 2030. Defendants sentenced in 2024 and 2025 receive prison terms 40% longer on average then those sentenced in 2021 and 2022 for identical conduct. Judges have lost patience with pandemic-era excuses. The confusion defense gets weaker every year.

The $64 billion the SBA estimates was stolen through PPP fraud isnt going unrecovered. The goverment has 700+ active cases and a task force that will operate through atleast 2030. If your applications appear in there database – and if you applied to multiple lenders, they do – the only question is timing.

Call us at 212-300-5196 before that timing catches up with you.