SEC v. Direct Lending Investments, LLC, No. LR-24432, Central District of California (Mar. 25, 2019) — Press Release
raw: Direct Lending Investments, LLC
Direct Lending Investments, LLC, No. 2:19-cv-02188 (Mar. 25, 2019)
summary
Direct Lending Investments, LLC and its owner Brendan Ross were charged with a multi-year fraud, resulting in $11 million in over-charges and a cumulative overstatement of $53 million, and agreed to a preliminary injunction and receiver appointment.
paragraph
Direct Lending Investments, LLC, a registered investment adviser, and its owner Brendan Ross allegedly engaged in a multi-year fraud, falsifying borrower payment information and inflating private fund returns. The scheme resulted in a cumulative overstatement of the valuation of its QuarterSpot position by approximately $53 million and the collection of $11 million in excess management and performance fees. The SEC charged Direct Lending with violating antifraud provisions of the Securities Exchange Act of 1934, Securities Act of 1933, and Investment Advisers Act of 1940.
narrative
The Securities and Exchange Commission (SEC) charged Direct Lending Investments, LLC, a registered investment adviser, and its owner Brendan Ross with a multi-year fraud involving the falsification of borrower payment data from QuarterSpot, Inc. The alleged scheme resulted in the inflation of fund valuations by $53 million and annual performance misrepresentations of 2-3%, leading to the improper collection of approximately $11 million in excess management and performance fees between 2014 and 2017. The SEC alleged violations of antifraud provisions under the Securities Exchange Act, Securities Act, and Investment Advisers Act. Without admitting guilt, Direct Lending agreed to a preliminary injunction and the appointment of a receiver to preserve investor assets. The SEC seeks disgorgement of ill-gotten gains, interest, monetary penalties, and permanent injunctions. The case was filed in the Central District of California, with litigation led by SEC attorneys Amy Jane Longo and Lynn Dean. The SEC's ongoing investigation is being conducted in the Los Angeles Regional Office.
Classified investment-adviser-fraud(confidence 100%). EDGAR detection: forms ADV/ADV-E/ADV-W/Form D· recall 33% / precision 13%. detection rule →
Statutes
Parties
Securities and Exchange CommissionDirect Lending Investments LLCKimberly SeedsDL Global, Ltd.Phillip CrumpJohn W. ButtrickOCC Legacy Investments, LLCThomas F. Reiser, Jr.Stacy K. LiAntoine BelloJohn ButtrickDouglas HamiltonMargaux Marbury HarroldBret M. WalbergWilliam McKennaJulie LewisMary Ellen Henske; SAS ARDISThe Kevin P. Ryan Trust 2012 U/I/D 3/30/2012Brent Horowitz and Heather Thompson as trustees of the Horowitz Family TrustRJDC Management Company LLCDouglas DemmingHarminder Brar and Pearlene Brar as trustees of the Brar Family TrustCharitable Lead Annuity Trust A U/W Of Steven CalicchioPareshkumar DesaiDavid Malcolm PottsDeloitte & Touche Cayman IslandsAlfred JacksonKarl Henry John Koehler III and Inna Koehler, trustees of the Jay Koehler and Inna Koehler Living TrustNancy MengelJohn BurkeRobert Mueckler, IIKilrea Family Investments, LLCAnthony V. DubRamesh Patel and Alison Patel, trustees of the R. Patel and A. Patel TTEEShawkat KeroJoseph S. ChasenFelicitas Deb Fund, LPEleanor Robinson as beneficiaries of the John P. Roy IRA accountEtienne Boillot and Stuart E. Lucas, trustees of the GST TrustDLI Properties, LLCExempt Trust U/W Of Steven Calicchio FBO Oriana CalicchioSameer KeroChanda Mehta KeroLisa D Gagnum BoillotStephen Jay AkanaPeter T. LambrakisLiberty Fund, LLCRajesh Kannah Ramanujam & Priya RaviAtkins Investment PartnershipSarita MehtaBlair AmbachAaron Michael SilvaRoy JordanLTR I LLCPhilip NadelJessa Ann GoebelHarmony Investments LLCBaer Family TrustPeter LambrakisFrancis CampiseLoeb Holding CorporationDeloitte & Touche LLPNeal DriscollJames SharmanMichael WitlinWiener Acquisition Company, LLCKenew DBP U/a DTD 12/31/2016;Deloitte Tax LLPJohn Vance HancockJack Frank AronovShefee Lulkin & Associates, Inc.Gerald Guy Stokes, Jr.GST Trust UWO L. Boillot FBO E. BoillotFrank TurnerOsman UsluElizabeth BlindermanOpus Fund Services (USA) LLCSSSB PartnershipYiming ZhangMax Luis TejadaOrdower InvestmentsBradley D. SharpNiloufer KeroFelicitas SA1, LPAffected and Interested PartiesMichael R. KaskieMichael DriscollN. Kero Investments, LTD., LLLPInterested PartiesMargaret RockwellExempt Trust U/W Of Steven Calicchio FBO Axel CalicchioTrinh-Mai N. VoJohn Henry Koehler IIIMillicent CalicchioDuff & Phelps, LLCCharitable Lead Annuity Trust B U/W Of Steven CalicchioGagnum BoillotSteven Patrick NedelkaShai WiningerMaxx Venture Fund H, LLCOgie, LLCQuarterSpot, Inc.2012 DPDS Fund L.P.Alia DriscollChristopher John BurkeBarry Lance PolonitzaRonald D. KaplanBryce MasonEtienne BoillotAJC Legacy Investments, LLCS. Kero Limited PartnershipChancellor Capital LLCAnne BurkeDoris J. WikDaniel Michael and Lillian Leong as trustees of the Michael Leong Family Trust DTD 08/13/2013The Steven C. Calicchio FoundationFour J Family LLCScott Anthony RonanKreiseder Family LLCValerie SabetNancy A.D. HancockJames E. SalterNarendrakumar MehtaHolly Nelson-Johnson and Terry Nelson-Johnson, trustees of the E. Holly Nelson-Johnson Family Irrevocable TrustArmando PaukerPalamine Holdings, LLCJerome Yap ChuaLiza Reynolds Limited PartnershipStephanie Marie GreinEisnerAmper LLCSandra Sue KoehlerAmy Chuckrow and Jonathan Stulgis, trustees of the Trust Under the Will of Robert Chuckrow DeceasedBennet WoodwardJames PapeschDusty47 LLCEtienne Boillot, Lisa DJohn P. Roy Jr.Sheffee LulkinEugene GoebelBrendan RossSmita MehtaOrla Cunningham, LLCJohn D. MichaelA-One Commercial Insurance Risk Retention Group, Inc.Quanta Finance LLCDoug FeurringMarcia Kosstrin TrustDennis J. FitzsimonsVasundhara ToliaTheodore StrangeWarrington Capital LLCGranger Construction CompanyKevin P RyanMichael JacksonCharles Harrold, IIIMaseco Alternative Fund L.P. and CEMP Maseco Alternative Credit Fund SPMandy IsaacJoseph M. BonieckiBarbara DrummForefront Partners LLC
Keywords
direct lendinglendingdirectlending investmentssecurities exchangesecsec'sinvestmentsllcsecuritiesfundsquarterspotinvestment advisermarch securitiesexchange commission
Exhibits & Attached Documents (1)
Extracted insights
Dollar amounts 2
- $53.00M $53 million $10M–$100M
- $11.00M $11 million $10M–$100M
Entities 3
- company direct lending investments, llc
- agency Securities and Exchange Commission
- organization Securities and Exchange Commission
Triples 19
- SEC charged Direct Lending Investments, LLC with a multi-year fraud
- SEC obtains consent to appoint receiver to preserve investor assets
- Direct Lending Investments, LLC resulted in approximately $11 million in over-charges of management and performance fees to its private funds
- Direct Lending Investments, LLC charged with multi-year fraud resulting in approximately $11 million in over-charges of management and performance fees to its private funds
- Securities and Exchange Commission obtains consent to appoint receiver to preserve investor assets
- Securities and Exchange Commission filed suit against Direct Lending Investments, LLC
- Securities and Exchange Commission charged Direct Lending Investments, LLC
- Securities and Exchange Commission obtains Consent to Appoint Receiver
- Direct Lending Investments, LLC resulted in $11 million in over-charges
- Securities and Exchange Commission filed Securities and Exchange Commission v. Direct Lending Investments, LLC
- Securities and Exchange Commission charged Direct Lending Investments, LLC
- Direct Lending Investments, LLC committed multi-year fraud
- fraud resulted in $11 million in over-charges
- Securities and Exchange Commission obtained consent to appoint Receiver
- Direct Lending Investments, LLC charged with fraud
- Securities and Exchange Commission charged Direct Lending Investments, LLC
- Direct Lending Investments, LLC resulted in $11 million in over-charges
- Securities and Exchange Commission obtained consent appoint receiver
- Direct Lending Investments, LLC preserves investor assets
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Extracted body text (2,853c)
SEC Charges Investment Adviser with Long-Running Fraud and Obtains Consent to Appoint Receiver to Preserve Investor Assets Litigation Release No. 24432 / March 25, 2019 Securities and Exchange Commission v. Direct Lending Investments, LLC, No. 2:19-cv-02188 (C.D. Cal. filed March 22, 2019) On March 22, 2019, the Securities and Exchange Commission charged registered investment adviser Direct Lending Investments, LLC with a multi-year fraud that resulted in approximately $11 million in over-charges of management and performance fees to its private funds, as well as the inflation of the private funds' returns. According to the SEC's complaint, Direct Lending advises a combination of private funds that invest in various lending platforms, including QuarterSpot, Inc., an online small business lender. The SEC alleges that for years, Brendan Ross, DLI's owner and then-chief executive officer, arranged with QuarterSpot to falsify borrower payment information for QuarterSpot's loans and to falsely report to Direct Lending that borrowers made hundreds of monthly payments when, in fact, they had not. The SEC alleges that many of these loans should have been valued at zero, but instead were improperly valued at their full value, because of the false payments Ross helped engineer. As a result, between 2014 and 2017, Direct Lending cumulatively overstated the valuation of its QuarterSpot position by approximately $53 million and misrepresented the Funds' performance by approximately two to three percent annually. The SEC alleges that Direct Lending collected approximately $11 million in excess management and performance fees from the Funds that it would not have otherwise collected, had the QuarterSpot position been accurately valued. The SEC's complaint, which was filed in the Central District of California, charges Direct Lending with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1), 206(2), and 207 of the Investment Advisers Act of 1940. Without admitting to any violations of federal law alleged in the SEC's action, Direct Lending has agreed to be preliminarily enjoined from violating these provisions and to the appointment of a receiver to marshal and preserve the assets of Direct Lending and the funds. The stipulated order is subject to court approval. The complaint also seeks disgorgement of allegedly ill-gotten gains along with interest, monetary penalties, and permanent injunctions. The SEC's ongoing investigation is being conducted in the Los Angeles Regional Office by Christopher A. Nowlin and supervised by Marc J. Blau, with assistance from the Office of Compliance, Inspections and Examinations. The SEC's litigation will be led by Amy Jane Longo and Lynn Dean. SEC Complaint
OCR text (2,853c · html-text · 99% conf)
SEC Charges Investment Adviser with Long-Running Fraud and Obtains Consent to Appoint Receiver to Preserve Investor Assets Litigation Release No. 24432 / March 25, 2019 Securities and Exchange Commission v. Direct Lending Investments, LLC, No. 2:19-cv-02188 (C.D. Cal. filed March 22, 2019) On March 22, 2019, the Securities and Exchange Commission charged registered investment adviser Direct Lending Investments, LLC with a multi-year fraud that resulted in approximately $11 million in over-charges of management and performance fees to its private funds, as well as the inflation of the private funds' returns. According to the SEC's complaint, Direct Lending advises a combination of private funds that invest in various lending platforms, including QuarterSpot, Inc., an online small business lender. The SEC alleges that for years, Brendan Ross, DLI's owner and then-chief executive officer, arranged with QuarterSpot to falsify borrower payment information for QuarterSpot's loans and to falsely report to Direct Lending that borrowers made hundreds of monthly payments when, in fact, they had not. The SEC alleges that many of these loans should have been valued at zero, but instead were improperly valued at their full value, because of the false payments Ross helped engineer. As a result, between 2014 and 2017, Direct Lending cumulatively overstated the valuation of its QuarterSpot position by approximately $53 million and misrepresented the Funds' performance by approximately two to three percent annually. The SEC alleges that Direct Lending collected approximately $11 million in excess management and performance fees from the Funds that it would not have otherwise collected, had the QuarterSpot position been accurately valued. The SEC's complaint, which was filed in the Central District of California, charges Direct Lending with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1), 206(2), and 207 of the Investment Advisers Act of 1940. Without admitting to any violations of federal law alleged in the SEC's action, Direct Lending has agreed to be preliminarily enjoined from violating these provisions and to the appointment of a receiver to marshal and preserve the assets of Direct Lending and the funds. The stipulated order is subject to court approval. The complaint also seeks disgorgement of allegedly ill-gotten gains along with interest, monetary penalties, and permanent injunctions. The SEC's ongoing investigation is being conducted in the Los Angeles Regional Office by Christopher A. Nowlin and supervised by Marc J. Blau, with assistance from the Office of Compliance, Inspections and Examinations. The SEC's litigation will be led by Amy Jane Longo and Lynn Dean. SEC Complaint