Large financial technology firms “caused tremendous harm to taxpayers” by facilitating the flow of tens of billions of dollars in fraudulent and improper pandemic relief payments, according to a bombshell report released Thursday by the House Select Committee on the Coronavirus Crisis.
In the report, the select committee detailed how financial technology companies, which were charged with vetting hundreds of thousands of applications for government assistance under the Paycheck Protection Program (PPP), enabled widespread fraud, waste, and abuse through lax standards and a lack of oversight.
As they facilitated the fraudulent flow of taxpayer cash, these so-called FinTech firms clipped billions off the top. All of it was made possible by poor — or non-existent — government oversight and regulation.
“Despite fintechs’ claims that their use of technology and innovation would allow them to better administer the PPP than traditional financial institutions, many of these companies appear to have failed to stop obvious and preventable fraud, leading to the needless loss of taxpayer dollars,” the report states.
“The Select Subcommittee’s investigation found that many fintechs, largely existing outside of the regulatory structure governing traditional financial institutions and with little to no oversight from lenders, took billions in fees from taxpayers while becoming easy targets for those who sought to defraud the PPP,” the report states.
Some of the reports findings suggest a stupendous lack of oversight — and even commonsense — on the part of large tech companies — and the government officials that entrusted them with the role of vetting relief applicants.
For example, the investigation found that just two unregulated FinTech firms — Womply and Blueacorn — approved nearly one-third of all PPP loans, but despite having such a large share of the program, these firms lacked basic protocols for detecting fraud and ineligible applications.
But much of the blame for the failure of FinTech firms to guard against fraud surely lies with the federal government for creating a perverse incentive for firms to make more loans rather than legitimate loans. The companies were paid in processing fees, meaning the more loans they shoved out the door, the more cash they took home.
Blueacorn received over $1 billion in taxpayer-funded processing fees, according to the report. $300 million of that went to the companies ownership, while just $8.6 million was spent on fraud detection.
“Blueacorn also gave approximately $666 million to a marketing firm controlled by members of its senior leadership—almost 50 times more than the $13.7 million the fintech spent on eligibility verification,” the report states.
Although Blueacorn promised to use fancy technology to guarantee program compliance, the committee found poor training and slapdash processes that relegated fraud detection and avoidance as a lower priority.
Womply, which earned more than $2 billion in processing fees, had similar problems.
“Multiple Womply lending partners criticized Womply’s fraud prevention practices, describing its systems as “put together with duct tape and gum” and accusing Womply of allowing “rampant fraud” to infiltrate the PPP,” the report states.
Remarkably, Womply even received PPP loans of its own for which it was ineligible to receive.
“Womply had a windfall 2021 net revenue of over $2 billion, largely thanks to taxpayer-funded PPP processing fees, and took over $5 million in PPP loans for itself, which the SBA later determined it was ineligible to receive,” the report states.
Even more remarkably, Womply was led throughout by CEO Toby Scammell, a convicted insider trader barred from trading securities.
“Womply CEO Toby Scammell—who was convicted of insider trading in 2014 and has been permanently barred from participating in the securities industry—led Womply’s fraud prevention efforts and instructed his company not to cooperate with federal PPP fraud investigators,” the report states.
Because Womply and Blueacorn had such lax fraud measures, would-be criminals targeted them for fraudulent applications in attempt to secure loans for which they were ineligible, per the report. This included members of notorious Florida drug gangs
“One gang member asked another to “show me Blueacorn” while another described Womply as “the website that[’s]  really hittin…’” and that “everybody in the hood” was using Womply,” the report states.
The entire report is filled with jaw-dropping findings that suggest the PPP loan program was one of the largest boondoggles in the history of the American government.
In a fit of hysteria, state and federal governments locked down the American economy and then began shoveling debt-financed cashed haphazardly into American economy with little regard for where it was going.
Opportunistic tech firms stood in the middle to facilitate the cash flow for a healthy fee, creating a massive transfer of wealth from present and future American taxpayers to some of the wealthiest Americans.
No government officials or FinTech CEO has been arrested as of yet for their roles in allowing or facilitating this widespread fraud.
Read the full report here.