In early January 2026, the Department of Homeland Security sent 2,000 federal agents to Minnesota’s Twin Cities, initiating the state’s largest fraud enforcement operation ever. Prosecutors estimate $9 billion to $18 billion stolen from social services programs since 2018, yielding 98 criminal charges, more than 60 convictions, and prompting Governor Tim Walz to abandon his 2026 reelection bid.
“Industrial-Scale Fraud” Exposed Across 14 Programs
First Assistant U.S. Attorney Joe Thompson described the crisis as “staggering industrial-scale fraud” swamping Minnesota and questioning core state functions. Investigators uncovered systematic crimes in at least 14 Medicaid programs, with half or more of $18 billion in allocations potentially fraudulent.
Feeding Our Future: $250 Million Pandemic Fraud Scheme
The biggest case involves Feeding Our Future, called by prosecutors the largest pandemic relief fraud charged in U.S. history. The Minneapolis nonprofit falsely reported over 250 food sites serving 91 million child meals that did not exist, backed by fake meal sheets, invoices, and rosters of invented children.
Empire Cuisine and Market in Shakopee claimed 18 million meals at 30-plus sites, but many were just parking lots, empty spaces, or tiny storefronts unable to handle claimed volumes. Scheme leader Abdiaziz Shafii Farah got 28 years in prison and $47 million restitution. Executive director Aimee Bock was convicted in March 2025 on wire fraud, bribery, and conspiracy; her sentencing awaits. Of 78 indicted, more than 50 convicted; authorities seized $60-75 million in cash, real estate, and luxury vehicles.
Housing Program Attracted “Fraud Tourism”
Thirteen people faced charges for defrauding the Housing Stabilization Services program, meant for housing instability aid. Two from Pennsylvania traveled to Minnesota to register firms, then filed $3.5 million in remote false claims. Program costs surged from $2.6 million in 2020 to $104 million in 2024, projected at $122 million for 2025, due to lax entry and records. The state legislature ended it in October 2025.
Multi-Agency Response and State Failures
The Small Business Administration suspended 6,900 Minnesota borrowers for 7,900 loans totaling $400 million. SBA Administrator Kelly Loeffler called it a scheme robbing taxpayers of COVID aid for families and businesses. The Justice Department issued 1,750 subpoenas, 130 search warrants, and 1,000 interviews; FBI used forensic accountants. Health and Human Services froze $185 million in child care payments, demanding records by January 9 or losing support.
A June 2024 state auditor report blamed the Education Department’s inadequate oversight of Feeding Our Future, ignoring 30 complaints from 2019-2021 amid lawsuit threats over discrimination claims. A December 2025 viral video by YouTuber Nick Shirley, viewed over 130 million times across platforms, showed empty Minneapolis daycares still billing government; Trump officials shared it, leading to White House enforcement details.
HHS Deputy Secretary Jim O’Neill mandated nationwide Medicaid daycare reforms: states must justify claims with receipts or photos before payments, the biggest child care oversight change in decades.
Broader Fallout and Ongoing Probes
Autism centers like Smart Therapy, run by Asha Farhan Hassan, stole $14 million of $31.8 million billed, using untrained teens as technicians. Star Autism Center took $6 million via fake bills and parent kickbacks.
Eighty-five of 98 charged (89%) are Somali descent, raising community stigma concerns. Representative Ilhan Omar said fraud is a financial crime, not tied to ethnicity or daycares. The Trump administration eyes denaturalization for citizenship fraud convicts, though experts foresee legal fights.
House Oversight Committee hearings began January 7, 2026, with more set for February targeting Walz and Attorney General Keith Ellison; three GOP legislators testified on failed state bills. Walz quit his race January 4 amid scrutiny.
State checks found nine video-featured daycares compliant in January visits, but inspectors noted snapshots miss past fraud. Federal prosecutors warned in late 2025 losses could continue escalating; probes continue into officials, laundering, and crime networks.
This crisis drives nationwide federal reforms for state-administered programs, adding verification, monitoring, and eligibility rules—echoing post-Katrina changes—affecting billions in payments and reshaping oversight to curb vulnerabilities.
Sources:
“Federal Jury Finds Feeding Our Future Mastermind and Co-Defendant Guilty in $250 Million Fraud Scheme.” U.S. Department of Justice District of Minnesota, March 2025.
“Feds: Fraud total could top $9 billion.” Axios Twin Cities, December 2025.
“Here’s What the Trump Administration Is Doing to Crush Minnesota’s Fraud Epidemic.” White House official website, January 2026.
“Minnesota’s Inadequate Oversight Led to $250M Meal Program Fraud.” Governing, June 2024.
“Everything we know about Minnesota’s massive fraud schemes.” CBS News, January 2026.
“House Oversight Committee to hold hearing on alleged Minnesota fraud.” CBS News, December 2025.
“Minnesota Gov. Tim Walz ends reelection bid amid child-care fraud controversy.” ABC News, January 2026.