The Federal Bureau of Investigation (FBI) arrested Brandan Ross, the Founder and former CEO of Direct Lending Investments, a firm that managed more than $1 billion assets.
Direct Lending Investments provides loans to small businesses and retailers. The firm’s funds generate profits when the loans are performing. In other words, borrowers are paying their loans on time.
According to the U.S. Attorney’s Office for the Central District of California, Ross is facing federal charges for allegedly defrauding investors. He allegedly falsified financial records to inflate the value of the funds he managed under Direct Lending Investments.
Ross lied about the status of loans managed by Direct Lending Investments
A grand jury indictment alleged that Ross executed his fraudulent scheme between late 2023 and early 2019. The scheme allowed him to charge investors millions of dollars in unauthorized fees.
The indictment alleged that Ross concealed the fact that some of the loans were not performing by falsifying the firm’s monthly reports. He made it appear that borrowers were making payments. In fact, the payments that he recorded were actually fee rebates given by the company originating the loans.
Ross caused Direct Lending Investments to overstate the value of the loans. He fraudulently inflated the monthly value of the funds’ assets by more than $300 million over a period of four years.
In addition, Ross allegedly arranged the sale of approximately $55 million of the loans to a third-party buyer in the summer of 2017. He allegedly helped conceal the deal, inflated the value of these loans, and falsely told the buyer that borrowers were making payments.
Ross resigned as CEO of Direct Lending Investment in March but he is still the owner of the firm. Soon after his resignation, the Securities and Exchange Commission (SEC) filed a civil complaint against his firm and a court-order receiver was appointed in early 2019.
On Monday, in conjunction with the unsealing of the criminal case against Ross, the SEV also filed a civil complaint against him for allegedly defrauding investors.
In the criminal complaint, the Justice Department charged Ross with 10 counts of wire fraud. Each count carries a statutory maximum sentence of 20 years in federal prison.
With assistance from the SEC, the FBI conducted a criminal investigation into the alleged fraud charges against Ross. Assistant United States Attorneys Poonam Kumar and Catherine Ahn of the Major Frauds Section are prosecuting the case.
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