Brendan Ross, 47, of La Cañada Flintridge, founder and former CEO of Direct Lending Investments, LLC (DLI), was arrested this morning on federal charges alleging a massive wire fraud scheme that defrauded investors out of millions by falsifying financial records and inflating fund values by over $300 million.
FBI special agents took Ross into custody in Los Angeles following the unsealing of a grand jury indictment filed July 30, charging him with 10 counts of wire fraud. The charges stem from a scheme between late 2013 and early 2019 in which Ross allegedly manipulated the performance data of loans held by DLI-managed funds, making non-performing assets appear profitable to justify inflated management fees.
By the summer of 2017, DLI had grown to manage over $1 billion in assets. According to the indictment, Ross directed the firm to invest in loans to small businesses and retailers, but when borrowers stopped paying, he concealed the defaults. Instead of reporting delinquencies, he used fee rebates from loan originators to fabricate payment histories, allowing DLI to falsely report steady returns and overstate asset values month after month.
The fraud enabled Ross to collect millions in unauthorized management fees—fees that would have been slashed or eliminated had investors known the true condition of the funds. The indictment details how, in summer 2017, Ross further misled a third-party buyer by inflating the value of approximately $55 million in loans, falsely claiming borrowers were current on payments when they were not.
Ross resigned as CEO in March 2019, shortly before the SEC filed a civil complaint against DLI, leading to a court-ordered receiver being appointed in April 2019. The SEC’s civil case, unsealed alongside today’s criminal charges, alleges investor deception and financial manipulation on a systemic level. The SEC provided critical assistance during the FBI’s criminal investigation.
Ross is set to be arraigned this afternoon in United States District Court in downtown Los Angeles. Each of the 10 wire fraud counts carries a maximum sentence of 20 years in federal prison. The case is being prosecuted by Assistant U.S. Attorneys Poonam G. Kumar and Catherine S. Ahn of the Major Frauds Section. An indictment is not a conviction—Ross is presumed innocent until proven guilty beyond a reasonable doubt.
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Key Facts
- State: California
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
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