The feds arrested Brendan Ross, 47, founder and CEO of Direct Lending Investments, LLC (DLI), an investment firm that specializes in debt instruments on federal charges alleging he falsified financial records to fraudulently inflate the value of the funds he managed, allowing him to charge investors millions of dollars in unauthorized fees.
By summer 2017, five years after Ross founded DLI, the firm had over $1 billion in assets under management. Ross allegedly directed DLI to invest the funds' assets in, among other things, a company that loaned money to small businesses and retailers. The DLI funds made money when the borrowers made timely payments.Rather than disclose some of the loans were not performing, Ross falsified monthly reports to make it seem borrowers were making payments. The “payments” actually came from fee rebates given by the company originating the loans. By lying about the true status of the loans, Ross allegedly caused DLI to overstate the value of these loans on the funds' books and fraudulently inflate the funds' value. Ross allegedly caused the monthly asset values of the funds to be cumulatively inflated by over $300 million over the course of about four years. By fraudulently inflating the value of the funds, Ross collected millions of dollars in fees he otherwise could not have charged to clients.
To further his scheme and help conceal it, Ross allegedly arranged for the sale of approximately $55 million of the loans to a third-party buyer in the summer of 2017. Ross once again inflated the value of these loans by lying about their status, falsely telling the buyer that borrowers had been making payments on many of these loans, according to the indictment.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Each of the 10 wire fraud counts in the indictment carries a statutory maximum sentence of 20 years in federal prison.