San Diego man previously charged for bilking investors faces new $4M COVID loan fraud indictment

San Diego Union-Tribune (CA)

A San Diego man who was previously indicted for bilking investors out of millions of dollars faces additional fraud charges related to a COVID-19 relief program.

Denny Bhakta, 41, was arraigned in federal court on Friday on charges that he fraudulently obtained $4 million in Paycheck Protection Program, or PPP, loans for multiple business entities he managed and controlled.

Bhakta allegedly applied for and received 18 PPP loans for four organizations he controlled including Fusion Hotel Management, LLC; Fusion Hospitality Corporation; True Vine Hospitality LLC; and Manu Bhakta Foundation. According to court documents, he lied on his applications about the number of employees, monthly payroll expenses, his ownership of other businesses and how the funds would be used.

The indictment accuses Bhakta of using the loan money to pay off credit cards, make large payments at casinos and make cash withdrawals. Additionally, the funds allegedly perpetuated an investment fraud scheme that resulted in a 2021 indictment.

In December 2021, Bhakta was charged with securities fraud and money laundering in a scheme that took at least $28 million from investors since 2016. According to the original indictment, he solicited investors for a business venture that would buy blocks of hotel rooms at a discounted rate, then sell them to an airline at a markup rate for large profits.

But instead of using the investors' funds to buy room blocks, Bhakta allegedly used that money to pay for personal expenses and feed a Ponzi-type scheme to partially pay back earlier investors.

According to the U.S. Attorney's office, Bhakta's new charge of bank fraud on top of the previous indictment of securities fraud and money laundering carries a maximum penalty of 30 years in prison.

Early in the pandemic, the U.S. Small Business Administration launched federally backed PPP loans to help businesses keep their workers employed and to cover expenses. Across two funding rounds, the government authorized more than $600 billion in forgivable loans to small businesses.

While these loans helped many struggling businesses, the program was also rife with fraud so the government launched the COVID-19 Fraud Enforcement Task Force to investigate these instances.

"The Paycheck Protection Program served as a lifeline to many businesses desperately trying to stay afloat during the pandemic," said Acting U.S. Attorney Andrew R. Haden. "Anyone who abused this critical program will be held accountable."

This story originally appeared in San Diego Union-Tribune.