Nearly $1 billion in COVID relief funds could vanish to fraud, watchdog warns

Watchdog finds $912 million at risk

The Labor Department’s Inspector General flagged about $912 million in pandemic-era unemployment benefits that nobody has touched.

Inspector General Anthony D’Esposito, a former New York congressman who took the role in December 2025, announced the findings on Feb. 11.

He said the money is at risk of disappearing to fraud and called on the Labor Department to move fast. D’Esposito said there’s only one acceptable outcome: getting the dollars back to the American people.

Most funds sit on unused debit cards

About $720 million is loaded on prepaid debit cards that claimants never used. Investigators found one single account holding more than $76,000.

Another $192 million has already moved to state unclaimed property offices. The financial institutions holding the funds haven’t been publicly named.

Of the $912 million total, about $715 million shows signs of fraud.

Without action, those balances could eventually be absorbed by the card companies or get buried in state unclaimed property programs, where recovery gets much harder.

Stolen identities fueled the scheme

During the pandemic, many states turned to prepaid debit cards to get unemployment money out the door quickly. Criminals jumped on the system.

They filed claims using stolen identities, and benefits landed on cards the real person never knew existed.

The cards sat untouched because the actual people whose names were used never filed for unemployment in the first place. That’s what makes this money recoverable now: the real recipients never claimed it.

The OIG wants states to act fast

D’Esposito urged the Labor Department to send guidance to states on working with banks and card companies to get the money back.

He warned that without quick action, states could fail to meet their duty to detect and recover improper payments. The OIG said it has already done the detective work and pinpointed where the funds are sitting.

Now it’s up to the states to team up with card issuers and unclaimed property offices to pull the money back.

Pandemic fraud may top $135 billion

The $912 million is just a tiny piece of a much bigger problem.

The Government Accountability Office estimated that total unemployment fraud during the pandemic ran between $100 billion and $135 billion. That’s roughly 11% to 15% of all unemployment benefits paid during the crisis.

More than $888 billion in federal and state benefits went out the door during COVID-19. The rush to get money to workers fast, combined with loosened safeguards, created a massive opening for criminals.

Thousands face charges for UI fraud

As of January 2025, the OIG’s investigations had led to more than 2,075 people being charged with unemployment fraud crimes. More than 1,550 of those ended in convictions.

Defendants received a combined 39,000-plus months behind bars.

The OIG reported over $1.1 billion in investigative monetary results and sent more than 45,000 fraud cases back to states for further action.

Those numbers keep growing as prosecutors work through the backlog.

Maryland showed how recovery can work

In August 2025, the Labor Department helped recover about $520 million in suspected fraudulent pandemic unemployment payments from Maryland.

A financial institution had frozen the funds, and a team effort between the OIG, the Employment and Training Administration, and the Maryland Department of Labor got the money returned.

Maryland and the federal government split the recovered funds. That’s exactly the kind of action the OIG wants every other state to copy.

Budget cuts stall 150,000 open complaints

The OIG has about 150,000 pandemic unemployment fraud complaints sitting in a pile, unreviewed. Budget cuts and the loss of extra funding forced the office to shrink its staff below pre-pandemic levels.

The OIG has paused its review of those complaints and pulled back sharply on new pandemic fraud investigations.

The office said it will keep working on open cases for as long as the statute of limitations allows, but resources are thin.

House votes to extend the prosecution clock

The original five-year window for prosecuting pandemic unemployment fraud started expiring on March 27, 2025. The House passed the Pandemic Unemployment Fraud Enforcement Act on March 11, 2025, by a vote of 295 to 127.

The bill would double the statute of limitations from five to 10 years for criminal and civil cases. At the time of the vote, the Department of Justice had 1,648 open, uncharged COVID-19 fraud cases.

The bill sat on the Senate calendar but hadn’t received a vote.

Less than 4% of stolen money recovered

Despite the scale of the fraud, only about $5 billion has come back, according to congressional estimates. That’s less than 4% of the $100 billion to $135 billion the GAO estimated was stolen.

As of May 2023, states had found about $55.8 billion in fraudulent and non-fraudulent overpayments but recovered only $6.8 billion. Of that, just $1.2 billion in confirmed fraudulent overpayments made it back.

Those numbers show why the OIG is pushing hard on the $912 million it has now tracked down.

Taxpayer money hangs in the balance

The $912 million in question is taxpayer money that was set aside for workers who lost jobs during the pandemic.

If nobody recovers it, the funds will stay with financial institutions or get absorbed into state unclaimed property programs.

The OIG’s findings suggest that most of this money came from fraudulent claims filed with stolen identities. Getting it back could help offset some of the broader losses.

The OIG said the investigative groundwork is done. Now it needs the Labor Department and states to act.

Federal prosecutors keep filing new cases

Federal prosecutors continue bringing new pandemic unemployment fraud charges in 2026.

Recent cases include a former TSA security officer, a postal employee, and multiple state legislators in Georgia who pleaded guilty to or face charges for pandemic fraud.

The OIG has worked alongside the Department of Justice’s National Unemployment Insurance Fraud Task Force. Whether the Senate extends the statute of limitations will shape how many more cases prosecutors can bring.

The OIG said it remains committed to pursuing open matters as long as the law allows.

This article was created with AI assistance and human editing.

Read more from this brand:

• US National Parks Win $3 Billion Fight, Congress Defies Trump
• America Will Owe $52 Trillion in 10 Years and Nobody Has a Plan
• ACA enrollment drops by over 1 million for 2026 after COVID-era subsidies expire