The Trump administration is suspending thousands of pandemic-era loans in Minnesota as it investigates allegations of widespread fraud. 

Concern about social services fraud in Minnesota erupted last month when federal prosecutors said that more than half of the $18 billion in federal Medicaid funds sent to the state since 2018 may have been stolen. 

The administrator of the Small Business Administration, Kelly Loeffler, said in a post on X on Thursday that her agency reviewed “thousands” of “potentially fraudulent” Paycheck Protection Program loans and Economic Injury Disaster Loan payouts. 

“Our agency took action to suspend 6,900 Minnesota borrowers amid suspected fraudulent activity. In total, these borrowers were approved for 7,900 PPP and EIDL loans worth approximately $400M,” Ms. Loeffler said.

She added that the borrowers suspected of fraudulent activity will be banned from all SBA loans going forward.

“We will also refer every case, where appropriate, to federal law enforcement for prosecution and repayment,” she said. “After years, the American people will finally begin to see the criminals who stole from law-abiding taxpayers held accountable — and this is just the first state.”

Earlier this week, Ms. Loeffler said the SBA is pausing annual grants to Minnesota as her agency investigates allegations of fraud in pandemic-era programs. 

The Department of Health and Human Services said Tuesday that it is freezing federal grants that support childcare programs in Minnesota due to concerns about fraud. 

At least 92 people have been charged with fraud schemes in Minnesota, 89 percent of them Somali Americans. The assistant U.S. attorney for the District of Minnesota, Joe Thompson, told reporters last month that the “magnitude” of the fraud “cannot be overstated.”

“What we see in Minnesota is not a handful of bad actors committing crimes. It’s staggering, industrial-scale fraud,” he said.

Last week, a 23-year-old YouTuber, Nick Shirley, fueled scrutiny of Minnesota’s management of state funds when he released a roughly 40-minute-long video that appeared to show that several state-funded daycare centers operated by Somali-Americans were not providing services to children. Some of the centers have claimed that Mr. Shirley visited them outside of operating hours. 

The FBI director, Kash Patel, said this week that law enforcement is actively investigating allegations of fraud. 

The House Oversight Committee is scheduled to hold a hearing on January 7. Several Minnesota state lawmakers are expected to testify that they warned Governor Tim Walz about fraud for years, but that they were “ignored.”

The chairman of the oversight committee, James Comer, told Fox Business that he believes Mr. Walz should be the “most concerned” because “he was, by all accounts, warned of this fraud, but yet didn’t want to do anything to offend the Somali voting population.”

Mr. Walz’s office has sought to distance him from the scandal, telling Fox News this week that the governor has “worked for years to crack down on fraud” and asked state lawmakers for “more authority to take aggressive action.”

President Trump says that fraudsters in Minnesota stole $18 billion in government funds. He also says that other Democrat-run states such as California, New York, and Illinois are “worse.”

“We’re going to get to the bottom of all those. It was a giant scam,” Mr. Trump said.

The White House press secretary, Karoline Leavitt, said this week that “people will be in handcuffs.”