SEC charges head of defunct California RIA with fraud
The agency says Brendan Ross manipulated data to show higher fund returns
The Securities and Exchange Commission has charged Brendan Matthew Ross, the owner and former CEO of defunct registered investment adviser Direct Lending Investments of Glendale, California, with “directing an intricate, multi-year effort to fraudulently inflate the value and returns for an investment position held by the funds that DLI advised.”
The SEC is seeking permanent injunctions, disgorgement, prejudgment interest and civil penalties, and the U.S. Attorney’s Office for the Central District of California has filed criminal charges against Ross.
The SEC’s complaint alleges that from early 2014 through late 2017, Ross manipulated payment data for the funds’ investment in loans made by QuarterSpot Inc., an online small business lender. Ross allegedly directed QuarterSpot to make payments to the funds, which gave the false impression that underlying borrowers were making principal payments on what were actually delinquent loans.
As a result of the scheme, the monthly returns DLI reported to investors were materially inflated, the SEC charged, while DLI allegedly collected at least $5 million in extra management and performance fees from the funds, and Ross personally received millions of dollars from DLI.
In 2019, the SEC charged DLI with fraud and placed the firm and its affiliates in receivership.
[More: SEC cites deficiencies in Form CRS filings]
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