Maple Grove Man Pleads Guilty to PPP Loan Scam
A Maple Grove man pleaded guilty on Wednesday to fraudulently applying for more than $9.6 million from the U.S. Small Business Administration’s Paycheck Protection Program (PPP), a program established to help businesses survive and ride out the pandemic while keeping their staffs employed.
Between April 2020 and August 2020 Aditya Raj Sharma applied for 16 PPP loans totaling more than $9.6 million from 10 different lenders. Between May 2020 and July 2020 Sharma created three new technology companies, none of which existed before the pandemic hit and the creation of the federal PPP program: Kloudgaze Inc., Neoforma LLC, and Mokume LLC.
Lenders approved three of Sharma’s PPP applications for proceeds totaling nearly $1.8 million.
But according to a statement on the case from the Minnesota U.S. Attorney’s office:
“Rather than using the funds for permissible business expenses, Sharma used the money to pay off unrelated legal debts, fund new business ventures, transfer approximately $14,000 to a financial account in India, and pay for home improvements, including landscaping and the installation of a $64,300 backyard pool at his residence.”
Sharma was the founder, president and CEO of Crosscode Inc., a cloud-based software development company that had been based in Maple Grove. But Crosscode had no connection to Sharma’s PPP scam: the company’s board of directors removed him as a director and terminated him in November 2019. The company and Sharma are now suing each other in federal court.
Crosscode, now based in Osseo, raised a $9.25 million round of Series A financing in 2019.
But Sharma nevertheless used the Crosscode name as part of his pitch for landing loans.
In PPP applications, Sharma claimed that he was the “100% owner” and CEO of Crosscode, that Crosscode did business as Kloudgaze, and that “Crosscode dba Kloudgaze” had approximately 29 employees. State of Minnesota records show no evidence of Kloudgaze paying a single employee.
As part of the case, investigators seized approximately $675,000 in multiple bank accounts controlled by Sharma. As part of the plea agreement, Sharma will forfeit those funds.
The Minnesota case is hardly an isolated incident. On May 17, U.S. Attorney General Merrick Garland announced the establishment the Covid-19 Fraud Enforcement Task Force.
Just last week, the Department of Justice arrested a Los Angeles man who had submitted 27 PPP bank loan applications for $27 million. The suspect ultimately landed $3 million in loans and is also being charged for using the money for personal expenses.
According to the announcement of the Los Angeles arrest:
“In the months since the PPP began, Fraud Section attorneys have prosecuted more than 100 defendants in more than 70 criminal cases. The Fraud Section has also seized more than $65 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds.”