A federal court filing by a fintech company revealed that it has been under investigation by the Department of Justice (“DOJ”) in relation to its Paycheck Protection Program (“PPP”) loan approval practices for over a year. This rare disclosure of a pre-indictment DOJ investigation warns that the government is refocusing enforcement efforts to the fintechs and financial institutions that administered PPP loans.

The fintech under investigation is an online loan servicing company that provides loans for small businesses, and processed over $7 billion in PPP loans to at least 300,000 businesses. The fintech disclosed that it was under investigation by the DOJ while responding to a subpoena in an unrelated case in the Southern District of Florida, where an individual was accused of submitting fraudulent PPP loan applications to the fintech. Apparently unaware of the ongoing investigation into the fintech, the government in the criminal case sought trial testimony about how the fintech administered PPP loans and loan applications.

The fintech filed a motion to quash the subpoena in June, stating that the DOJ already was investigating its conduct under the False Claims Act (“FCA”) in a separate case on the theory that it improperly approved PPP loans that obviously were fraudulent or not within Small Business Association (“SBA”) parameters. According to the same filing, the DOJ also is investigating the adequacy of the fintech’s fraud and anti-money laundering controls. The...

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