LOS ANGELES, CA – Brendan Ross, 52, the former CEO and founder of Direct Lending Investments LLC (DLI), has been sentenced to 40 months in federal prison for wire fraud, after falsifying financial records to inflate the value of investment funds, allowing him to charge clients millions in unauthorized fees.
Fraudulent Scheme and Financial Manipulation
Ross, who founded DLI in 2012, managed over $1 billion in assets by 2017. According to prosecutors, he directed the firm to invest in small business loans, profiting when borrowers made timely payments. However, instead of reporting non-performing loans, Ross falsified financial records, making it appear as though payments were being made. These payments were actually fee rebates from the loan originator, misleading investors about the true value of the funds.
Over four years, Ross fraudulently inflated asset values by more than $300 million, enabling him to collect millions in fees that he otherwise would not have been entitled to.
Attempts to Conceal Fraud
In 2017, Ross attempted to cover up the scheme by selling $55 million worth of loans to a third-party buyer, falsely claiming that borrowers had been making payments. This deception further misrepresented the financial health of the investment firm.
Legal Consequences and Restitution
Ross pleaded guilty to wire fraud in August 2022 and was sentenced by U.S. District Judge Dale S. Fischer, who also ordered him to pay $5.9 million in restitution.
Investigation and Prosecution
The case was investigated by the FBI, with substantial assistance from the U.S. Securities and Exchange Commission (SEC), which had previously filed a civil complaint against Ross in August 2020.
The prosecution was led by Assistant U.S. Attorney Scott Paetty of the Major Frauds Section.
Conclusion
Ross’s conviction highlights the severe consequences of financial fraud, particularly in the investment sector. Authorities continue to urge investors to exercise caution and report suspicious financial activities to regulatory agencies.
