E. Martin Estrada, U.S. Attorney | U.S. Attorney's Office for the Central District of California
Brendan Ross, the former CEO of Direct Lending Investments LLC, has been sentenced to 40 months in federal prison. The sentence was handed down by United States District Judge Dale S. Fischer in Los Angeles. Ross was found guilty of wire fraud after he admitted to falsifying financial records to inflate the value of funds managed by his investment firm, which specializes in debt instruments.
Ross, 52, from La Cañada Flintridge, was also ordered to pay $5.9 million in restitution. He founded Direct Lending Investments LLC (DLI) in 2012 and led the company until his resignation in March 2019. By mid-2017, DLI had more than $1 billion under management.
According to court documents, Ross directed DLI to invest assets into a company that provided loans to small businesses and retailers. These investments were profitable when borrowers made timely payments on their loans. However, some loans did not perform as expected. Instead of disclosing this fact, Ross manipulated monthly reports to suggest that borrowers were making payments when they were not.
The reports showed payments coming from fee rebates rather than actual borrower repayments. This deception led DLI to overstate the value of its loan portfolio by more than $300 million over four years. Consequently, Ross collected millions in unauthorized fees from investors.
To hide his actions further, Ross sold approximately $55 million worth of these loans to a third-party buyer in 2017 while falsely claiming that borrowers had been making regular payments on them.
Prosecutors highlighted the severe impact on investors and employees affected by Ross's fraudulent activities: “These losses reflect intense financial hardships, including the decimation of retirement and investment accounts.”
The FBI conducted an investigation into the case with assistance from the U.S. Securities and Exchange Commission (SEC), which filed a civil complaint against Ross in August 2020. Assistant United States Attorney Scott Paetty prosecuted the case for the Major Frauds Section.
