Federal prosecutors stunned a courtroom by announcing that up to $9 billion in Minnesota Medicaid claims since 2018 could be fraudulent, potentially marking the largest such scam in U.S. history. More than half of the program’s payouts raised red flags, linked to providers that existed largely on paper, with investigators warning this is just the start of their findings.
Scale of the Fraud
Authorities revealed that 50% or more of Minnesota’s Medicaid claims showed irregularities, prompting the FBI to redirect significant resources to the state. The schemes operated on an industrial level, using fabricated providers, bogus documents, and lax supervision. By late December 2025, prosecutors estimated rings in the Twin Cities area had billed as much as $9 billion for nonexistent services. Assistant U.S. Attorney Joe Thompson labeled it “industrial-scale fraud.” To date, 98 individuals face charges, with over 57 convictions, and cases keep mounting across at least 14 aid programs, including Medicaid housing and autism therapy.
Pandemic Vulnerabilities Exposed
Many weaknesses trace to COVID-19 emergency measures, when rules were relaxed to accelerate aid. This created openings exploited since 2018. State audits later uncovered ignored warnings: unusual billing spikes, bloated provider lists, and persistent compliance lapses. Agencies delayed action, wary of lawsuits or discrimination accusations. A 2024 Legislative Auditor report found departments overwhelmed by sudden funding surges, ill-equipped to manage the volume.
Concentrated in Twin Cities
The fraud centered heavily in Minneapolis and surrounding areas, where childcare and health outfits collected millions despite empty facilities or phantom clients. A widely shared 42-minute video from December 26, 2025, depicted deserted daycare centers still drawing public money, fueling outrage and drawing parallels to emerging cases in Maine and Ohio. Over 90% of suspects shared similar backgrounds, though local leaders like Minneapolis City Council member Jamal Osman cautioned against broad stigmatization of communities.
Oversight Failures and Pushback
State employees who flagged issues in 2025 reported retaliation, including career threats for persistent warnings. No major leadership shifts have occurred in implicated agencies, despite criticism. Governor Tim Walz’s administration insists reforms are in progress, but auditors and insiders contend years of unheeded alerts allowed damage to balloon. A federal judge recently overturned one convictionâAbdifatah Yusuf’s for $7 million tied to his Promise agencyâprompting an appeal by Attorney General Keith Ellison. Dozens of other verdicts stand, with evidence of cash withdrawals and luxury buys like cars and property.
Federal Response and Broader Implications
The FBI, under Director Kash Patel, boosted operations in Minnesota even before the video went viral, joined by Immigration and Customs Enforcement amid reports of at least $1 billion already lost. Treasury probes checked for overseas diversions, including to groups like Al-Shabaab, but found no terror links; the $9 billion estimate nears Somalia’s 2024 GDP of $11.97 billion. Recovery efforts target asset freezes and restitution, building on prior wins like the $250 million Feeding Our Future case, though full clawback seems improbable. Auditors call known losses the “tip of a very large iceberg.” As probes deepen and hearings probe policy roles, Minnesota’s crisis spotlights Medicaid’s national frailties, pressing for reforms to avert repeats elsewhere.
Sources:
âHalf or more of $18 billion paid out by Medicaid in Minnesota may be fraudulent, US attorney says.â CBS News Minnesota, 17 Dec 2025.
âProsecutor says 14 Minnesota programs have been targeted by fraudsters, and state is swamped.â Associated Press, 18 Dec 2025.
âAbdifatah Yusuf found guilty of bilking Medicaid program out of over $7.2 million.â Minnesota Attorney Generalâs Office, 12 Aug 2025.
âMinnesota Department of Education: Oversight of Feeding Our Future.â Office of the Legislative Auditor, State of Minnesota, Jun 2024.