Eastman Kodak's (KODK -1.83%) hopes of becoming a key supplier to the pharmaceutical industry just hit a major snag.

The one-time camera and film giant was attempting to use a $765 million loan from the U.S. government to pivot its ailing business. Its plan was to launch Kodak Pharmaceuticals, which would produce pharmaceutical ingredients deemed critical in the fight against COVID-19. 

Now, those plans have been thrown into disarray.

A downwardly sloping stock chart.

Eastman Kodak's stock plummeted on news that its loan could be in jeopardy. Image source: Getty Images.

The Defense Production Act loan was awarded to Kodak by the U.S. International Development Finance Corporation (DFC) at the direction of President Donald Trump on July 28. Kodak's stock soared on the news, from a closing price of $2.62 on July 27 to as high as $60 on July 29. Part of the problem, however, is that Kodak's shares rose nearly 25% in heavy trading on July 27 -- the day before the official announcement was made. 

Moreover, many people are questioning why it was Kodak that received the loan, which was meant to bolster the nation's stockpile of vital coronavirus-related medical supplies, rather than an experienced pharmaceutical company. Perhaps even more puzzling is why Kodak's board of directors chose to grant executive chairman Jim Continenza options for 1.75 million of the company's shares one day before the deal was announced. 

These questions spurred a Securities and Exchange Commission (SEC) probe into Kodak's disclosures and other activities surrounding the loan.  Lawmakers, such as Senator Elizabeth Warren, also urged the SEC to investigate Kodak for potential insider trading. 

In turn, the DFC said on Monday that it will hold up the loan payment until the situation is resolved. "Recent allegations of wrongdoing raise serious concerns," it said. "We will not proceed any further unless these allegations are cleared." 

Kodak's stock plunged on the news. As of 12:45 p.m. EDT, Kodak's shares were down more than 27% after falling as much as 42.9% earlier in the day.