WASHINGTON — The Department of Health and Human Services announced on Tuesday that it has frozen all child care payments to the state of Minnesota amid news of a massive fraud scandal in the state.
“We have frozen all child care payments to the state of Minnesota,” Deputy Secretary Jim O’Neill and Administration for Children & Families Assistant Secretary Alex Adams announced in a video released on X Tuesday evening. “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.”
HHS has taken three actions “against the blatant fraud that appears to be rampant in Minnesota and across the country,” he explained. The first action: activating HHS’ “Defend the Spend system,” requiring justification and a receipt or photo evidence before they send money to a state.
The second action hinges directly on journalist Nick Shirley’s investigative work over the past few months: O’Neill says that he and his colleagues have identified the individuals in Shirley’s video, and are demanding a “comprehensive audit of these centers,” including attendance records, licenses, complaints, investigations, inspections, and more.
HHS said its third action is launching a fraud reporting hotline and email address where parents, providers, and members of the public can submit tips.
“We have turned off the money spigot and we are finding the fraud,” the officials said.
Independent journalist Nick Shirley speaks during a roundtable discussion in the State Dining Room of the White House on October 08, 2025 in Washington, DC. (Photo by Anna Moneymaker/Getty Images)
Shirley’s viral videos show a number of examples of concerning activity in the Minneapolis, Minnesota, region. His work comes after a federal prosecutor said that there has been at least $9 billion in fraud in the state under Minnesota Democratic Governor Tim Walz’s watch.
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The Daily Wire reported earlier this month that the Minnesota government was still paying an accused Somali fraudster to run assisted living homes as that man awaited trial for his alleged role in the nation’s largest COVID scam, in which he ran a fraudulent charity.
According to First Assistant U.S. Attorney Joe Thompson, 14 Medicaid services in Minnesota are at “high risk” for fraud.
Shirley, who appeared on Fox News over the weekend, discussed how he found suspicious daycare and learning centers in Minneapolis with no children present that are potentially fronts for scams.
“It’s so obvious,” Shirley explained, referring to the apparent fraud. “If you’re living in Minnesota, you have to raise your eyebrows and think, ‘What’s going on?’ Literally, if you drive around Minneapolis, you’ll see daycare centers, autism centers — you will then see transportation companies that have snow piled up as if they haven’t moved it in months.”
“A kindergartner could’ve figured out there was fraud going on.”
Walz addressed the viral reports on Tuesday, acknowledging that the state has been “taken advantage of” by fraudsters who prioritized “greed” over the needs of children and the elderly. But Walz blamed the issue on President Donald Trump.
We’ve spent years cracking down on fraud – referring cases to law enforcement, shutting down and auditing high-risk programs.
Trump keeps letting fraudsters out of prison.
To the national news just now paying attention, here’s what we’ve done to stop it. pic.twitter.com/bgvKPxVxxm
— Tim Walz (@Tim_Walz) December 30, 2025