A founder of the lender service provider Blueacorn has entered a guilty plea in connection with a scheme to fraudulently obtain COVID relief money guaranteed by the U.S. Small Business Administration (SBA) through the Paycheck Protection Program (PPP). Nathan Reis, 47, of Rio Grande, Puerto Rico, and previously of Arizona, pleaded guilty to conspiracy to commit wire fraud.
The Scheme
The federal government charged that Reis conspired with others to file false and fraudulent PPP loan applications, including creating documents that falsified income and payroll figures to obtain loan funds they were not eligible for.
Reis co-founded Blueacorn, a financial technology company (fintech) in April 2020—it was purportedly created to help small businesses and individuals obtain PPP loans. Through Blueacorn, the feds claim, Reis and his co-conspirators submitted fraudulent PPP loan applications that they knew contained materially false information. As part of the scheme, Reis and others fabricated documents, including tax documents and bank statements to support applications. Reis and his co-conspirators based their fees on a percentage of the funds received (notably, the IRS has consistently called this a red flag).
Paycheck Protection Program (PPP) Loans
PPP loans were designed to help businesses keep their workers on payroll during the pandemic. While loans could be obtained from various lenders, they were guaranteed through the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. PPP loans helped fund payroll costs, including benefits, and could also be used for other expenses, including worker protection costs related to COVID. And, importantly, borrowers who met certain criteria were eligible for loan forgiveness—making it free money.
Initially, Congress authorized up to $349 billion in forgivable loans as part of the program. Congress subsequently authorized over $300 billion in additional PPP funding.
As with the Employee Retention Credit (ERC) program, the lure of free money has proved irresistible to many—including those who have intentionally taken advantage of the programs when they were not eligible.
The PPP Fraud Problem
The House Select Subcommittee on the Coronavirus Pandemic (formerly the Select Subcommittee on the Coronavirus Crisis), a bipartisan House of Representatives subcommittee, produced a staff report in December 2022 on the role of fintechs in facilitating PPP fraud. The investigation followed reports that fintechs approved a high volume of fraudulent PPP loan applications. The investigation found that two fintechs facilitated nearly one in every three PPP loans funded in 2021 failed to implement systems capable of consistently detecting and preventing fraudulent and otherwise ineligible PPP applications. One of those fintechs was Blueacorn.
According to the report, Blueacorn received over $1 billion in taxpayer-funded processing fees but spent little on fraud prevention and eligibility verification. Specifically, the report claimed that “Blueacorn transferred nearly $300 million in profits to its owners while only spending $8.6 million—less than one percent of the fees it received for its PPP work—on its fraud prevention program.” The report further alleged Blueacorn had only “one direct employee who assisted with processing PPP loan applications” for the 1.7 million loans it reviewed.
At the time, the report also noted that Blueacorn’s founders arranged PPP loans for themselves through Blueacorn, “some of which have signs of potential fraud.” According to the investigation, “[i]n addition to likely taking over $120 million in taxpayer-funded PPP processing fees as personal profit, Mr. Reis and Ms. Hockridge received nearly $300,000 in PPP loans, some of which were facilitated by their own company. Applications for these loans—some of which Blueacorn lending partner Capital Plus later demanded be repaid—included supporting documentation with suspicious elements. In one application, Mr. Reis claimed to be an African American and a veteran—both of which appear to be false.”
Criminal Charges
In August 2025, Reis pleaded guilty to conspiracy to commit wire fraud.
Wire fraud involves wire communication sent across state lines to promote or commit fraud, while mail fraud involves the use of the U.S. Mail (or other mail carriers) to execute a scheme.
Conspiracy charges mean that two or more persons agreed to commit a crime (in this case, wire fraud) and the defendant joined, knowing the purpose of the scheme and intending to help accomplish that purpose. Court documents did not name the co-conspirators in the case.
“During a national emergency, this defendant exploited a taxpayer-funded program that individuals and small businesses desperately needed to survive,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “This conviction demonstrates the Department’s ongoing commitment to bring to justice those who would steal from the public fisc to enrich themselves.”
Sentencing For Fraud
Reis is scheduled to be sentenced on November 21, 2025, at 8:30 a.m. in the US Courthouse in Fort Worth, Texas, before Judge Reed C. O’Connor. Reis faces a maximum penalty of 20 years in prison.
Fraud Investigation
The FBI, IRS-CI, the Special Inspector General for Pandemic Recovery, Federal Reserve Board-CFPB Office of Inspector General, and SBA OIG investigated the case.
IRS Criminal Investigation (CI) is the sixth-largest law enforcement agency in the U.S. and is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations like tax fraud, narcotics trafficking, money laundering, public corruption, healthcare fraud, and identity theft. While other federal agencies also have investigative jurisdiction for money laundering and some bank secrecy act violations, the IRS is the only federal agency that can investigate potential criminal violations of the tax code. The agency has 19 field offices located across the U.S. and 14 attaché posts abroad.
The Fraud Section leads the Criminal Division’s prosecution of fraud schemes that exploit the PPP. Since the enactment of the CARES Act, the Fraud Section has prosecuted over 200 defendants in more than 130 criminal cases and has seized over $78 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds. More information can be found on the DOJ website.
Report COVID Fraud
The government encourages anyone with information about allegations of attempted COVID fraud to report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or by using the NCDF Web Complaint Form.