Kabbage Inc. Agrees to Resolve PPP Fraud Allegations for $120 Million

The Justice Department announced that Kabbage Inc., also known as KServicing, will settle allegations of violating the False Claims Act by extensively submitting false PPP loan claims on behalf of others. According to PPP Loan Fraud Whistleblower lawyer Jason T. Brown, “This promises to be another dimension of accountability, where the lending institutions are held liable for allowing taxpayer monies to be handed out like candy without oversight, simple due diligence and in some cases outright knowing the loans they funded were fraudulent loans”. Kabbage, now called KServicing Wind Down Corp., declared bankruptcy in October 2022. The United States will receive an unsecured claim during the bankruptcy proceedings.

Congress established the PPP in March 2020 under the CARES Act to assist small businesses during the COVID-19 pandemic. Private lenders, including Kabbage, could approve PPP loans and seek forgiveness if the funds were used properly. However, Kabbage inflated loan amounts and failed to adhere to fraud controls, resulting in fraudulent claims.

Key officials, including Principal Deputy Assistant Attorney General Brian M. Boynton and Acting United States Attorney Joshua S. Levy, emphasized the importance of holding lenders accountable for the misuse of PPP funds. The settlement demonstrates the commitment to maintaining PPP integrity and holding violators accountable.

Kabbage’s violations included inflating PPP loan amounts and failing to implement fraud controls. The U.S. government will receive a claim of up to $120 million in the bankruptcy proceedings. The resolution also includes a $12.5 million credit for Kabbage. Under the False Claims Act the individual who blew the whistle would be eligible for a False Claims Act PPP Loan Fraud Whistleblower Reward up to $36 million.