Fraud Friday: $55 Million Bank Loan Fraudster’s Fake Paper Trail Nets 6 Years in Prison 

January 23, 2026

Bob Coleman
Founder & Publisher

Fraud Friday: $55 Million Bank Loan Fraudster’s Fake Paper Trail Nets 6 Years in Prison 

Rahul Shah was sentenced to 6 years in prison for fraudulently obtaining over $55 million in commercial loans and lines of credit. He was also convicted of PPP loan fraud for a $441,138 loan application.

In July 2025, Shah was convicted of seven counts of bank fraud, five counts of making false statements to a financial institution, two counts of money laundering, and two counts of aggravated identity theft.

“The defendant orchestrated a massive scheme to fraudulently obtain over $55 million in commercial loans and lines of credit from federally insured financial institutions and exploit the Paycheck Protection Program,” said Assistant Attorney General Tyson Duva. “The defendant’s lies and deceit put our financial system at risk and wasted limited resources.”

U.S. Attorney Andrew Boutros added that the duration, brazenness, and magnitude of the fraud scheme spoke to the defendant’s determination. He noted that uncovering and successfully prosecuting such a sophisticated scheme was a testament to the diligent work of prosecutors and federal law enforcement agents.

Shah was the first person indicted in Illinois for PPP loan fraud.

On April 30, 2020, Shah applied for a PPP loan and submitted three payroll documents for the company N2N, which was owned by his wife. The Forms 941 reported that N2N paid $50,062 in the second quarter of 2019, $157,000 in the third quarter of 2019, and $218,000 in the fourth quarter.

The problem was that Shah made it all up.

The PPP loan was declined by PNC Bank. 

One of the supporting documents was a Form 1099-C in the amount of $68,715. When the FBI interviewed the individual listed, she stated that she worked for Katalyst Technologies from 2015 to 2017, but never for N2N. The 1099 submitted by Shah contained her actual Social Security number. This pattern was repeated for another individual whom Shah claimed earned $98,300. Again, the form contained that person’s Social Security number, but he told a Treasury Inspector General special agent that he had left Katalyst employment in 2015.

At several points during the interview, agents challenged Shah’s assertion that the payroll tax forms were prepared in India. When asked if he could produce an email showing that Indian employees transmitted the tax documentation, Shah said, “I don’t have an email.” Agents responded, “What I’m gathering is that this likely didn’t come from India, these 1099s, because the email account is not going to reflect that.” Shah replied, “Right, right.” When asked whether the forms were prepared in the United States, Shah responded, “Probably, yeah.” When asked, “You all prepared the forms here, not somebody in India, and submitted it thinking it would keep our business alive. Is that an accurate way to put things?” Shah replied, “I would say so.”

The total average monthly payroll submitted was $176,000. In reality, N2N’s total annual employee compensation was only $49,000.

This mattered because, while Shah was on bond, he was continuing an even larger fraud that had begun in 2015. His company, Katalyst Technologies, purportedly generated $153 million per year in revenue. That representation supported multiple credit facilities, including a $15 million line of credit with State Bank of India, a $10 million term loan from Bank of Baroda, and a $32 million foreign currency working capital term loan from U.S. Bank, which was assumed from Bank of Baroda in December 2017.

To support the working capital line of credit, Shah created a sophisticated paper trail to inflate sales. He produced a fake audited financial statement materially overstating the volume of payments Katalyst was receiving. This was backed by fake bank statements and false financial information from affiliated shell companies. In reality, Shah listed receivables from companies that were actually vendors.

The fraud lay in the numbers. Although total deposits into Katalyst bank accounts increased only 25% from 2015 through 2020, Shah provided fake bank statements and fake audit reports indicating deposits had increased by approximately 124% and revenue by 118% over the same period. Banks relied on this false documentation to increase Katalyst’s debt from $12 million to $57 million.

Shah created a complete paper trail, including falsified invoices, fake customer confirmation letters, fake audit reports, and fake tax returns, including those used to support the PPP loan.

Banks advance funds on working capital loans using a borrowing base calculation, typically advancing up to 80 percent of eligible receivables aged less than 90 days. As long as collateral exceeds the loan balance, borrowers can draw additional capital. In this case, all documentation provided by Shah was fraudulent, leaving lenders exposed to a $23 million loss.

Shah continued the scheme through 2020. After his release on bond following the PPP arrest, the fraud persisted until Katalyst’s board of directors terminated him.

One hallmark of financial fraud is hiding behind complexity. Shah represented that he had full ownership of Katalyst and a parent company based in India, complicating audit verification. Auditing an India-based company is not a problem for major accounting firms. The problem arises when the borrower fabricates the audit report, which occurred here.

At trial, Shah testified for two days, claiming he surrendered control of bank accounts to an India-based finance team in 2013. Federal prosecutors showed that all signature cards remained under his control and bank statements were mailed to his home.

He testified that he was unaware the audit letters, financial statements, and PPP documentation were fraudulent. Investigators proved the documents were prepared in the U.S. The jury rejected his testimony after evidence showed Katalyst funds were diverted to Shah’s personal account, including for a $1.8 million home in Evanston, Illinois.

In addition to a $560,000 annual salary for himself and his wife, Shah received secret multimillion-dollar payments and used company funds for country club memberships, Chicago social clubs, Chicago Bears season tickets, and “other perks befitting the founder and CEO of a successful technology company.”

One example involved a $1.3 million working capital draw from Bank of Baroda for a company called ReaLength, which claimed to provide 3,400 hours of consulting services, $18,500 in software customization, and $11,230 in travel expenses. After receiving the funds, Shah distributed $700,000 to himself and his wife before transferring $500,000 back to Katalyst.

Prosecutors sought a 20-year sentence, citing Shah’s evasiveness and repeated concealment of financial information from probation officers. He refused to provide tax returns, supporting documentation, or consent for credit checks, and failed to disclose assets held in his wife’s or family members’ names despite transferring fraud proceeds to those accounts. Although he had no prior criminal history, prosecutors argued the fraud spanned more than five years.

Defense attorneys cited Shah’s diabetes and argued a lengthy sentence would effectively be a death sentence.

Rahul Shah was sentenced to 6 years in prison.