Two fintech founders made millions facilitating PPP loans. Now, they're indicted for fraud

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

Stephanie Hockridge, a former Arizona newscaster, has been summoned for a court appearance scheduled for Monday, and her husband Nathan Reis was arrested in Puerto Rico Thursday.

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

According to the indictment, after submitting an application for a PPP loan, Hockridge sent Reis a text message that said, "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 comes with a 20-year maximum prison sentence if convicted. Attempts made through multiple avenues to reach Reis, Hockridge and Blueacorn were unsuccessful.

Related: North Texas execs charged in $53 million PPP fraud scheme

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

Blueacorn, founded in Arizona in 2020, seized on 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 collected through the PPP program. The New York Times calculated that Blueacorn netted over $1 billion in 2021 through this arrangement.

The problem: many of these 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 firms like Blueacorn may be facilitating PPP fraud. Congress released a report after that, ultimately recommending that the DOJ investigate Blueacorn and several other firms for fraud. The report also revealed that Blueacorn's owners profited over $300 million.

"Reis, Hockridge, and their coconspirators fabricated tax documents, doctored bank statements, and made other material misrepresentations in order to deceive lenders and [the Small Business Administration] into issuing loans in amounts for which applicants were not eligible," the indictment alleges.

They also, "charged borrowers kickbacks..., despite knowing that borrowers were prohibited from using PPP loan proceeds to make such payments."

Four bank transactions involving fraudulently acquired PPP funds sent from a bank in the Northern District of Texas are singled out 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 to more than 130 other PPP fraud cases, according to the DOJ.

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