Trump Admin Freezes Millions in SBA Aid to Minnesota Over Fraud Concerns [WATCH]

The Trump administration has moved to freeze millions of dollars in federal small-business assistance to Minnesota, citing what it describes as widespread and ongoing fraud tied to the state’s social services programs and a breakdown in oversight under Democratic Gov. Tim Walz, as reported by Fox News.

Small Business Administration Administrator Kelly Loeffler sent a letter Tuesday to Tim Walz informing him that the agency will halt more than $5.5 million in annual funding to SBA resource partners operating in Minnesota “until further notice.”

“I am notifying you that, effective immediately and until further notice, the SBA is halting the disbursement of federal funds to SBA resource partners operating in the state of Minnesota, totaling over $5.5 million in annual support,” Loeffler wrote.

“This action is the result of a fundamental breakdown in the public trust. Under your leadership, Minnesota failed to safeguard taxpayer dollars, and SBA will not continue to place federal resources at risk in a state where oversight measures are ignored and accountability is abandoned.”

The decision comes as Minnesota continues to face scrutiny over multiple large-scale fraud schemes involving public assistance programs.

U.S. Attorney Joseph Thompson said Thursday that a “significant amount” of roughly $18 billion in Medicaid funding was likely lost to fraud.

In her letter, Loeffler blamed Walz’s administration for turning Minnesota into what she described as the “epicenter” of the largest fraud scandal of the COVID-19 pandemic era.

Today, I informed Governor Tim Walz that SBA is halting $5.5 million in annual funding to Minnesota pending further review.

This action follows alarming findings: individuals indicted in the $1 billion Somali fraud scheme also received at least $3 million in PPP loans, and SBA…

— Kelly Loeffler (@SBA_Kelly) December 23, 2025

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She cited criminal convictions involving members of a Somali-linked fraud network and said the scope of the misconduct demonstrates that fraud has become “endemic” within the state’s welfare programs.

Loeffler referenced Thompson’s calculations, indicating that a Minneapolis-centered fraud scheme netted approximately $1 billion and that at least half of certain Medicaid funding programs subsidized by Minnesota taxpayers were “pocketed by criminals,” putting the total loss at no less than $9 billion.

She also noted that the U.S. Department of Agriculture, which administers SNAP and related programs, along with Treasury Secretary Scott Bessent, has launched investigations into the fraud.

According to the SBA, at least $2.5 million in Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) funds issued during the pandemic were tied to the Somali fraud scheme.

In addition, Loeffler said another $430 million in PPP subsidies—representing roughly 13,000 individual loans—had been flagged as potentially fraudulent but were funded anyway, including some loans that were later fully forgiven during the Biden administration.

“The volume and concentration of potential fraud is staggering, matched in its egregiousness only by your response to those who attempted to stop it,” Loeffler wrote.

“When legislators and whistleblowers raised concerns about potential abuse during the pandemic, your Administration resisted oversight, refused accountability, and allowed the misconduct to metastasize.”

Loeffler also criticized Walz for previously dismissing some criticism of his administration’s approach to welfare spending as “racism.”

Walz has said that fraudsters will go to prison and that “I don’t care what color you are [or] religion you are,” but also warned against “demonizing an entire population,” according to PBS.

As part of the freeze, the SBA is immediately halting $2.22 million in Small Business Development Center awards, $450,000 in Women’s Business Center awards, $2.6 million in microloan program awards—representing the entire 2025 disbursement—and approximately $550,000 in other funding.

Loeffler said Minnesota’s fraud scandals are the direct result of “socialist policies deliberately designed to pump out welfare funding without oversight or accountability.”

“SBA’s responsibility is to taxpayers and small business owners, not to criminals or the politicians who enable them – We will continue to do what you did not: protect federal dollars on behalf of the American people,” she wrote.

Fox News Digital reported it reached out to Walz’s office for comment regarding the letter and the administration’s handling of the fraud allegations.

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