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The Small Business Administration is moving to freeze grant money flowing into Minnesota after explosive allegations of large-scale fraud tied to state oversight failures, with SBA Administrator Kelly Loeffler signaling an immediate crackdown following recent independent reporting.

In a series of comments shared publicly by conservative commentator Benny Johnson, Loeffler said the agency is “cutting off and clawing back” SBA grants to the state while investigators dig deeper into what she described as a rapidly expanding fraud network.

Johnson wrote that Loeffler told him she was “disgusted and sickened” after reviewing footage from YouTuber Nick Shirley, whose on-the-ground reporting in Minnesota highlighted what he said were sham daycare and learning centers collecting millions in public funds despite showing little or no sign of legitimate operations.

According to Johnson, Loeffler blamed the situation on Democrat Gov. Tim Walz, accusing his administration of refusing to enforce basic rules governing small businesses and allowing fraud to flourish unchecked.

Johnson said Loeffler told him SBA investigators were able to identify roughly half a billion dollars in suspected fraud within days of focusing on Minnesota, calling the operation an “industrial-scale crime ring” that ripped off American taxpayers.

“Pending further review, SBA is freezing all grant funding to the state in order to stop the rampant waste of taxpayer dollars and uncover the full depth of fraud,” Loeffler said, according to Johnson’s account, adding that the total scope of the scheme remains unknown and could reach into the billions.

The controversy gained national traction after Shirley posted video of himself visiting multiple facilities, including a South Minneapolis site known as the Quality Learning Center, which he reported was approved for federal aid for up to 99 children but appeared inactive during normal business hours.

The center’s sign, Shirley noted, even misspelled the word “learning” as “learing.”

In the footage, a woman inside the building is heard shouting “Don’t open up,” falsely claiming Shirley and his colleague were Immigration and Customs Enforcement agents.

After the video circulated, Rep. Tom Emmer, a Republican, publicly demanded answers from Walz, questioning how such facilities were approved for millions in taxpayer funding.

Shirley’s reporting followed earlier investigations, including a November report by City Journal alleging that members of Minnesota’s Somali community had sent millions of dollars in stolen taxpayer funds overseas, with some of that money reportedly ending up in the hands of Al-Shabaab, a U.S.-designated terrorist organization.

While Walz’s administration has insisted it takes fraud seriously, the SBA’s decision to halt grant funding marks one of the most aggressive federal responses yet, underscoring how rapidly a local scandal has escalated into a national reckoning over oversight, enforcement, and accountability in Minnesota.

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FBI Director Kash Patel issued a blunt warning over the weekend as federal investigators continue unraveling a sprawling fraud operation centered in Minnesota, saying the hundreds of millions already uncovered represent “just the tip of a very large iceberg.”

In a lengthy statement posted to social media, Patel said the Federal Bureau of Investigation had quietly surged agents and investigative resources into the state well before the scandal gained traction online. That effort, he said, led to the takedown of an estimated $250 million fraud scheme that stole federal food aid intended for vulnerable children during the COVID pandemic.

According to Patel, the investigation exposed a network of sham vendors, shell companies, and large-scale money laundering operations tied to the Feeding Our Future case. Defendants named by the FBI include Abdiwahab Ahmed Mohamud, Ahmed Ali, Hussein Farah, Abdullahe Nur Jesow, Asha Farhan Hassan, Ousman Camara, and Abdirashid Bixi Dool, each charged with offenses ranging from wire fraud to conspiracy and money laundering.

Patel also said Abdimajid Mohamed Nur and others were charged in a separate attempt to bribe a juror with $120,000 in cash. He noted that several related cases have already resulted in guilty pleas, prison sentences of up to 10 years, and nearly $48 million in restitution orders.

Despite those outcomes, Patel warned the case is far from finished.

“The FBI believes this is just the tip of a very large iceberg,” he said, adding that investigators will continue following the money and that the probe remains ongoing. Patel further confirmed that many of those convicted are being referred to immigration authorities for possible denaturalization and deportation proceedings where legally applicable.

The renewed focus follows a viral video circulated by independent journalist Nick Shirley, which appeared to show multiple childcare and learning centers operating as empty or nonfunctional storefronts. The footage sparked immediate backlash from Republicans, including Vice President JD Vance.

House Majority Whip Tom Emmer accused Minnesota Gov. Tim Walz of sitting idle while massive sums were stolen from taxpayers. Walz addressed the allegations during a November press conference, before the full scope of the fraud became public, saying the scandal “undermines trust in government” and threatens programs meant to help vulnerable residents.

“If you’re committing fraud, no matter where you come from or what you believe, you are going to go to jail,” Walz said at the time.

Authorities say the alleged schemes date back to at least 2015, beginning with overbilling Minnesota’s Child Care Assistance Program and later expanding into Medicaid-funded disability and housing programs. One such housing initiative, aimed at helping seniors and disabled residents secure stable housing, was shut down earlier this year after officials cited what they described as large-scale fraud.

The fallout has already reached the federal level. Last month, President Trump announced the suspension of Temporary Protected Status for Somali nationals, arguing that Minnesota had become a hub for organized welfare fraud and money laundering activity.