Minneapolis, MN — In a shocking discovery, federal authorities have uncovered a large-scale fraud scheme that siphoned billions of taxpayer dollars from Minnesota’s child care system, leading to widespread criminal activities, including international drug trafficking and money laundering. The fraud, which had been operating under the guise of licensed child care centers, was allegedly masterminded by Nimco Ali Hassan, a Somali-American woman well-connected in the Twin Cities’ local leadership circles.

Authorities believe the scheme, spanning over five years, involved falsifying child care enrollment records and diverting federal funds meant for low-income families. More than 750 children were reportedly enrolled in multiple child care centers controlled by Hassan, but federal investigators found no evidence that any of these children were ever cared for in the facilities. Instead, the funds were funneled into a sprawling criminal operation.

On the morning of the raid, federal agents from the FBI and the Department of Health and Human Services (HHS) stormed one of Hassan’s centers in South Minneapolis. They were met with an eerie scene: empty rooms, untouched toys, and records of children who never existed. The facility, which had collected more than $46 million in taxpayer money over the past year, appeared to have been nothing more than a front for a massive fraud operation.

Further investigation revealed that the fraud involved the creation of “ghost children” — fictitious identities that were used to claim child care subsidies. These fake records were crafted by combining stolen Social Security numbers and forged birth certificates, allowing Hassan’s network to defraud the system of nearly $250 million.

The Cartel Connection

The most disturbing discovery, however, was made when agents opened a steel safe in Hassan’s private office. Inside, they found $38 million in cash and packages containing nearly 270 kilograms of narcotics stamped with the scorpion logo of the notorious CJNG (Jalisco New Generation Cartel), one of Mexico’s most dangerous drug organizations.

“This was not simply a case of benefit fraud,” said one federal agent. “It was a sophisticated criminal network operating under the cover of a child care license. The money was being funneled into drug production and international money laundering operations.”

The funds, once diverted, were transferred through complex financial networks, eventually making their way to drug production facilities in Mexico, as well as offshore accounts in East Africa and the Middle East. Between 2021 and 2025, more than $2.8 billion flowed through Hassan’s network, with just a fraction being used for legitimate child care purposes.

The Impact on Local Communities

The impact of the fraud rippled through the local child care industry and families across the Twin Cities. Investigators confirmed that at least 70,000 low-income children lost access to child care services as a result of the diverted funds, and more than 146 legitimate child care providers were forced to shut down. In some neighborhoods, licensed child care capacity fell by as much as 22%, leaving working parents scrambling to find alternative care options.

“The collapse of these child care centers has been devastating to our community,” said a local child care provider who wished to remain anonymous. “We couldn’t compete with centers that didn’t have to pay for staff or meals or even upkeep on their buildings. It was an unfair playing field.”

Families also felt the brunt of the fraud, with emergency leave requests spiking and local shelters preparing for an influx of families in need of support. In immigrant communities, fear and distrust of local authorities grew, as many parents worried that their involvement with the system could lead to scrutiny.

As the investigation unfolded, it became clear that Hassan’s operation didn’t just exploit weaknesses in the child care system — it thrived because of them. Federal auditors found that approval processes were rushed and oversight was minimal, particularly during emergency funding periods when the need to move money quickly overshadowed verification processes.

Over the course of five years, Hassan’s network received over 1,200 approvals from state and municipal offices, many of which were signed off by senior administrators without any on-site verification. Multiple red flags — including duplicate records and implausible enrollment growth — were routinely dismissed as “acceptable variance” or “within expected parameters.”

This systemic failure was not confined to Minnesota. Federal analysts have warned that similar schemes could be operating in other states, with millions of dollars potentially being funneled into criminal enterprises nationwide.

The Legal Fallout

By the time federal authorities completed their raids, 93 individuals had been charged in connection with the scheme, including 82 Somali Americans. Hassan, who was believed to have fled the country, remains a key figure in the investigation. Federal agents are actively pursuing leads to locate her and dismantle the larger network she allegedly helped establish.

“This case underscores a critical flaw in our welfare system,” said one federal official. “When systems prioritize speed over accountability, fraud becomes inevitable. We need to rebuild trust in these programs and ensure that checks and balances are put in place to prevent future exploitation.”

The Minnesota fraud scandal is raising alarms about the vulnerabilities in welfare programs nationwide. Analysts suggest that similar fraud operations could be operating in multiple states, siphoning off billions of dollars that should be going to support vulnerable populations.

In response to the crisis, Minnesota officials have pledged to overhaul child care funding mechanisms and implement stricter verification procedures. However, many experts argue that this scandal is a symptom of a broader problem — one where a culture of convenience, political correctness, and fear of confrontation allowed fraud to thrive unnoticed for years.

Moving Forward

As authorities continue to unravel the full scope of the operation, one thing is clear: the damage caused by this fraud goes beyond lost funds. For many families in Minnesota, this scandal represents a loss of stability, trust, and access to services that are supposed to protect their children and support their livelihoods.

“We cannot afford to let this happen again,” said a local advocate for child care reform. “The lessons learned here must be applied nationwide. We need to prioritize integrity over speed, and oversight over convenience. Our most vulnerable populations deserve better.”

As the investigation continues, officials are urging anyone with information about similar fraud schemes to come forward, promising full cooperation with law enforcement in the fight against systemic abuse of welfare programs.