US cuts Minnesota child care funds amid massive fraud probe

US federal agents kicked off a large-scale investigation after a YouTuber claimed to have uncovered a massive Somali-run scam in Minneapolis

The US has frozen all child care payments to the state of Minnesota following allegations of widespread fraud, according to Deputy Secretary of Health and Human Services Jim O’Neill.

The move came after reports surfaced alleging that Minnesota funneled millions of taxpayer dollars to fraudulent daycares over the past decade.

“We have frozen all child care payments to the state of Minnesota,” O’Neill said in a statement on X, outlining three additional actions taken in response to the alleged fraud.

O’Neill stated he activated the “Defend the Spend” system for all Administration for Children and Families (ACF) payments, requiring justification and proof of receipt before funds are disbursed.

We have frozen all child care payments to the state of Minnesota.

You have probably read the serious allegations that the state of Minnesota has funneled millions of taxpayer dollars to fraudulent daycares across Minnesota over the past decade.

Today we have taken three actions… pic.twitter.com/VYbyf3WGop

— Deputy Secretary Jim O'Neill (@HHS_Jim) December 30, 2025

He also demanded a comprehensive audit from Minnesota’s Democratic Governor Tim Walz, including attendance records, licenses, complaints, investigations and inspections of the centers in question. Additionally, a dedicated fraud-reporting hotline has been launched.

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Assistant Secretary Alex Adams stated his office provides Minnesota with $185 million in childcare funds annually, intended to benefit approximately 19,000 American children.

“Any dollar stolen by fraudsters is stolen from those children,” Adams said.

The investigation was prompted by a video posted by YouTuber Nick Shirley, who alleged a large-scale fraud scheme involving Somali-run childcare centers, estimating over $110 million in fraudulent claims.

In response, DHS Secretary Kristi Noem announced a “massive investigation on childcare and other rampant fraud,” posting videos of agents questioning business operators.

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FBI Director Kash Patel said resources had been “surged” to Minnesota, warning that these cases were just “the tip of a very large iceberg” and that perpetrators could face “denaturalization and deportation.”

Walz has defended his administration, while lauding the state’s diverse makeup and large Somali community. Meanwhile, state officials have disputed Shirley’s findings, claiming the centers featured in his video had been inspected within the last six months with “no findings of fraud.”

“We’re committed to holding bad actors accountable,” O’Neill said. “Regardless of rank or office, anyone who’s involved in perpetrating this fraud against the American people should expect to be prosecuted to the fullest extent of the law.”