Photographer: Kent Nishimura/Bloomberg
(Bloomberg) — The Trump administration is halting $5.5 million in annual funding to Minnesota over allegations that individuals and businesses in the state committed fraud with government loans, according to a social media post from the US Small Business Administration.
The move is the latest in a series of examples of the federal government withholding funds from states and cities led by Democrats. The announcement comes as Republicans ramp up investigations into alleged fraud in Minnesota, including some groups that received COVID-era emergency loans.
President Donald Trump and his administration recently have focused attention on the cases of alleged fraud, criticizing Minnesota Governor Tim Walz, claiming he mishandled the administration of government funds. Trump last month announced he was revoking temporary protected status for Somali refugees living in the state, citing accusations Somalis were involved in fraud.
SBA Administrator Kelly Loeffler announced she would halt $5.5 million in small business funding going to the state “pending further review” in a post on X on Tuesday.
Today, I informed Governor Tim Walz that SBA is halting $5.5 million in annual funding to Minnesota pending further review.
This action follows alarming findings: individuals indicted in the $1 billion Somali fraud scheme also received at least $3 million in PPP loans, and SBA…
— Kelly Loeffler (@SBA_Kelly) December 23, 2025
“With dozens of investigations underway, the conclusion is unavoidable: Minnesota cannot be trusted to administer federal tax dollars,” she said in the post, which didn’t provide further details on what funds would be halted.
Claire Lancaster, a spokesperson for Walz, blasted the Trump administration for seeking to blame the Minnesota governor rather than addressing weaknesses in federal programs.
“While the Governor has been fighting fraud, the Trump administration has spent the past month sending dozens of letters, statements, and social media posts filled with threats to withhold funding and investigate the state,” Lancaster said in a statement. She said the alleged frauds “exposed failures within federal systems” that “are administered and overseen by the federal government and which have nothing to do with the Walz Administration.”
The House Small Business Committee on Tuesday sent a letter to Loeffler requesting information about federal pandemic relief funds flowing to entities in Minnesota connected to the fraud scandal.
The Minnesota nonprofit Feeding Our Future was at the center of the largest pandemic relief fraud charged in US history, according to the Justice Department. Dozens of individuals have been charged in connection with that case as of November.
Loeffler and the SBA did not immediately respond to requests for comment.
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