LOS ANGELES – PRESS RELEASE: The founder and former CEO of an investment firm that specializes in debt instruments was arrested this morning on federal charges alleging he falsified financial records to fraudulently inflate the value of the funds he managed, allowing him to charge investors millions of dollars in unauthorized fees.
Department of Justice
U.S. Attorney’s Office
Central District of California
FOR IMMEDIATE RELEASE
Tuesday, August 11, 2020
Owner of Investment Firm That Managed Over $1 Billion in Assets Arrested in Federal Case Alleging He Defrauded Investors
By the summer of 2017, only five years after Ross founded DLI, the firm had over $1 billion in assets under management. According to the indictment, Ross allegedly directed DLI to invest the funds’ assets in, among other things, a company that loaned money to small businesses and retailers. The DLI funds made money when the loans performed, meaning that the borrowers made timely payments. The indictment alleges that, rather than disclose some of the loans were not performing, Ross falsified monthly reports to make it appear borrowers were making payments. The “payments” actually came from fee rebates given by the company originating the loans.
By lying about the true status of the loans, Ross caused DLI to overstate the value of these loans on the funds’ books and fraudulently inflate the funds’ value, according to the indictment. Specifically, Ross allegedly caused the monthly asset values of the funds to be cumulatively inflated by over $300 million over the course of about four years. By fraudulently inflating the value of the funds, Ross was able to collect millions of dollars in fees he otherwise would not have been able to charge to clients, according to the indictment.
To further his scheme and help conceal it, Ross allegedly arranged for the sale of approximately $55 million of the loans to a third-party buyer in the summer of 2017. Ross once again inflated the value of these loans by lying about their status, falsely telling the buyer that borrowers had been making payments on many of these loans, according to the indictment.
Ross is expected to be arraigned on the indictment this afternoon in United States District Court in downtown Los Angeles.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
Each of the 10 wire fraud counts in the indictment carries a statutory maximum sentence of 20 years in federal prison.
This matter was investigated by the FBI. The SEC provided substantial assistance during the criminal investigation.
This case is being prosecuted by Assistant United States Attorneys Poonam G. Kumar and Catherine S. Ahn of the Major Frauds Section.
Contact:
Thom Mrozek Director of Media Relations United States Attorney’s Office Central District of California (Los Angeles) (213) 894-6947
Press Release Number:
20-144