PPP Lender Arrested on Fraud Charges Also Allegedly Reversed PPP ACHs, Separate Civil Lawsuit States

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New York Supreme CourtIt’s not just criminal fraud charges that the CEO of MBE Capital Partners is facing. Rafael Martinez, who was arrested two weeks ago for allegedly lying to financial institutions and the government about MBE’s size in order to fraudulently obtain PPP lender status, is also facing a civil suit in New York where more than four dozen co-plaintiffs are suing his company. In it, several of the plaintiffs have alleged that MBE unexpectedly and without notice debited out the full balance of the PPP loans from their accounts weeks or even months after they got funded them in the first place.

“Since a majority of these [Plaintiffs] had already properly used their PPP proceeds at the time of Defendants reclamation reversal, in a majority of instances the funds withdrawn from each account consisted, in whole or in part, of non-PPP funds,” the lawsuit states.

Plaintiffs contend that MBE had taken this step because MBE had wrongly suspected some type of fraud on the part of the borrowers, and that nevertheless did not have the authority to reverse the ACHs even if it were true. MBE in its public reply denied the allegations and filed a counterclaim against a single individual that had purportedly assisted the plaintiffs in filing their PPP applications.

While the government has brought hundreds of claims against PPP borrowers, this is the first known instance of a PPP lender taking a vigilante approach to suspected fraud by just allegedly debiting back the entirety of the PPP funds. Plaintiffs claim that when MBE did so, that they weren’t even under any kind of investigation by the SBA.

The civil suit in New York is unrelated to the fraud that MBE Capital CEO Rafael Martinez was arrested for. Federally, Martinez is accused of using misrepresentations to trick his way into becoming an authorized PPP lender that helped him pocket $71 million in lender fees in the process. With that Martinez reportedly bought a villa in the Dominican Republic, a Ferrari, and private jets.

The civil suit in New York, meanwhile, can be found under Index Number: 652786/2021

Last modified: March 14, 2022

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