On July 11, the San Francisco Fed filed a complaint in the U.S. District Court for the District of Puerto Rico, against a Puerto Rico-based PPP lender and its two principals for allegedly defaulting on the terms of loans. According to the complaint, the lender allegedly failed to comply with the terms of the PPP for some portion of outstanding PPP Loans, totaling approximately $4.3 million. The Fed held a first-priority security interest in certain PPP loans and the collateral that defendant pledged to secure these advances. Following the default, the Fed claimed that defendant fraudulently transferred assets, including the collateral pledged to the Fed, to defendant principals. Such transfers had subsequently left defendant with insufficient capital to meet its obligations to the Fed. As a result, the Fed sought to recover its collateral or other assets to settle the outstanding debts. Specifically, the Fed sought damages for breach of contract, collection of money, conversion, and rescission of fraudulent transfers of various assets for almost $67 million and will request the court to rescind the fraudulent transfers and to grant other declaratory and equitable relief as outlined in the complaint.