Two fintech founders made millions facilitating PPP loans. Now they are charged with fraud

Two founders of fintech firm Blueacorn were indicted in connection with a widespread Paycheck Protection Plan fraud scheme in the Northern District of Texas, the Justice Department announced Friday.

Stephanie Hockridgea former news anchor in Arizona, has been subpoenaed for a court hearing scheduled for Monday, and her husband Nathan Reis was arrested in Puerto Rico on Thursday.

The unsealed indictment alleges the pair submitted false and fraudulent PPP loan applications to themselves, made thousands of dollars and facilitated false and fraudulent PPP loan applications through Blueacorn.

According to the indictment, after submitting an application for an OPP loan, Hockridge sent Reis a text saying, “This is us trying to apply for free money – when we don’t qualify. lol.”

Reis and Hockridge have each been charged with one count of conspiracy to commit wire fraud and four counts of wire fraud. Each count carries a maximum prison sentence of 20 years if convicted. Attempts by several routes to reach Reis, Hockridge and Blueacorn were unsuccessful.

North Texas execs charged in $53 million PPP fraud scheme

When the federal government launched the Paycheck Protection Plan in response to the 2020 COVID-19 pandemic, lenders favored established borrowers seeking larger loan amounts. This prompted Congress to raise lender fees on small loans to encourage banks to help small businesses left out to that point.

Blueacorn, founded in Arizona in 2020, seized this opportunity and provided lender services, processing thousands upon thousands of loan applications from small businesses and individuals on behalf of partner lenders. Lenders would then give Blueacorn a cut of the fees charged through the PPP program. New York Times calculated that Blueacorn earned over $1 billion in 2021 through this scheme.

The problem: many of those applications contained false and fraudulent information, according to the indictment. A paper published by UT Austin McCombs School of Business researchers in 2022 first identified that fintech companies such as Blueacorn may be facilitating PPP fraud. Congress issued a report thereafterand ultimately recommended that the DOJ investigate Blueacorn and several other firms for fraud. The report also revealed that Blueacorn’s owners earned over $300 million.

“Reis, Hockridge and their co-conspirators fabricated tax documents, fabricated bank statements and made other material misrepresentations to deceive lenders and the (Small Business Administration) into issuing loans in amounts for which applicants were not eligible,” the indictment states.

They also “collected repayments from borrowers … despite knowing that borrowers were prohibited from using the proceeds of PPP loans to make such payments.”

Four bank transactions involving fraudulently obtained PPP funds sent from a bank in the Northern District of Texas are highlighted in the indictment. The case is being prosecuted by the Fraud Section of the DOJ’s Criminal Division, which has seized over $78 million in connection with more than 130 other PPP fraud cases, according to the DOJ.

The 2022 UT Austin investigation identified more than 1.8 million OPP loans that showed signs of fraud, totaling $76 billion, or nearly 10% of the total money disbursed through the OPP program. Almost 1 million of those loans, representing $21 billion, came through fintech companies like Blueacorn.