Two men have been charged with participating in a scheme to defraud the US government of $24m in COVID-19 economic aid, with one suspect spending $96,000 worth of funds meant to help faltering small businesses on a Ferrari.
Diamond Blue Smith, 36, a Florida recording artist, and Tonye C Johnson, 28, the owner of a Pennsylvania towing company, were charged with wire fraud, bank fraud, and conspiracy to commit wire fraud and bank fraud, according to the US Department of Justice.
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Smith is accused of using forged documents to obtain a loan of $426,717 for his company, Throwbackjersey.com LLC, from the Paycheck Protection Program. After obtaining that loan, authorities allege that Smith used fraudulent documents to obtain another PPP loan worth $708,065 for his other company, Blue Star Records LLC. Smith allegedly also offered to obtain PPP loans for others in exchange for kickbacks.
Smith allegedly used the loan money – which was designed to help bail out small businesses hurt by the pandemic – for luxury purchases, including the Ferrarri, which was seized by authorities when they arrested Smith this week.
Johnson is accused of using falsified documents to obtain a loan worth $389,627 for his own company, Synergy Towing & Transport LLC, paying a portion of the loan proceeds to his alleged co-conspirators in the scheme.
The criminal complaint lists 11 alleged co-conspirators in Florida and Ohio. All told, the scheme involved at least 90 fraudulent applications for PPP loans worth $24m. Some $17.4m of the fraudulent loans were approved and funded by financial institutions, according to the Department of Justice.
The US government earmarked up to $349bn in forgivable loans to small businesses in March through the PPP, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In April, Congress authorised an additional $300bn in funding for the programme. Under the law, PPP loans must be spent on payroll costs, interest on mortgages, rent, and utilities.
Congressional Democrats and the administration of President Trump remain deadlocked on the next round of coronavirus economic relief aid, even as the chairman of the Federal Reserve, Jerome Powell, has warned that “too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.”