SAN DIEGO — A San Diego man accused of defrauding investors in his companies now faces additional charges after he allegedly obtained $4 million in COVID-related loans illegally, U.S. Attorney Andrew Haden’s office announced.

Denny Bhakta, 41, was arraigned in federal court on Friday for the new charges relating to Paycheck Protection Program (PPP) loan fraud. Bhakta pleaded not guilty to the charges, according to court documents.

According to the Haden’s office, Bhakta was first indicted in Dec. 2021 for allegedly running a fraud scheme through companies he managed that took $28 million from investors since 2016, including Fusion Hotel Management, LLC and Fusion Hospitality Corporation.

Bhakta allegedly told investors that Fusion routinely acquired discounted blocks of hotel rooms from Hilton, according to the original indictment, which the company then sold to United Airlines at a higher price for a significant profit.

But, the funds were allegedly misappropriated, covering personal expenses and payments to other investors, according to court documents.

In a superseding indictment, a grand jury added the additional charges, based on allegations that Bhakta applied for and received at least 18 PPP loans on behalf of several of the entities he managed based on false information.

Court documents say these alleged lies included a reported misrepresentation of the entities’ number of employees and average monthly payroll expense, his ownership of other businesses and whether the PPP loan funds would be used for eligible expenses.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act established the PPP program to allow banks to make forgivable loans to small businesses to help them keep their doors open and employees on their payroll during the pandemic.

However, the superseding indictment accuses Bhakta of not using the PPP funds he received for those purposes, despite initially applying under that pretense.

Instead, he allegedly used the funds to make credit card payments, pay large expenses at casinos and make cash withdrawals. He also allegedly used some of the money to perpetuate an investment fraud scheme, the indictment says.

“The Paycheck Protection Program served as a lifeline to many businesses desperately trying to stay afloat during the pandemic,” Acting U.S. Attorney Andrew R. Haden said in a release. “Anyone who abused this critical program will be held accountable.”

Bhakta faces charges of securities fraud, bank fraud and money laundering. If convicted, he can face a maximum penalty of 30 years in prison. A status hearing is scheduled for the case on Sep. 8 at 1:30 p.m.