March 26, 2019 Comments (0) Blog, Current Investigations, Securities Fraud

SEC Charges Direct Lending Investments in Alleged Multi-Year Fraud

Direct Lending Investments Investigation, Featured by Top Securities Fraud Lawyers, The White Law Group

Investigating Potential Lawsuits – Direct Lending Investments

Have you suffered losses investing in Direct Lending Investments? If so, the securities attorneys at The White Law Group may be able to help you.

According to a press announcement this week, the Securities and Exchange Commission has reportedly charged registered investment adviser Direct Lending Investments LLC with a multi-year alleged fraud that purportedly resulted in approximately $11 million in over-charges of management and performance fees to its private placement funds, as well as the inflation of the private funds’ returns.

Direct Lending Investments reported approximately $866.3 million in assets under management as of May 31, 2018, according to reports.

The company reportedly advises a private fund structure comprised of two feeder funds, Direct Lending Income Fund L.P. and Direct Lending Income Feeder Fund Ltd., as well as a master fund, DLI Capital, Inc., and it solely manages all three funds, according to the complaint.

The SEC’s complaint alleges that Direct Lending’s funds invest in various lending platforms. The SEC alleges that for years Direct Lending’s owner and then-chief executive officer arranged with QuarterSpot, Inc. an online small business lender to falsify borrower payment information for QuarterSpot’s loans and to falsely report to Direct Lending that borrowers made hundreds of monthly payments when they had not.

According to the SEC, many of these loans should have been valued at zero, but instead were allegedly improperly valued at their full value, because of the false payments the owner allegedly helped engineer.

Consequently, Direct Lending allegedly cumulatively overstated the valuation of its QuarterSpot position by approximately $53 million and purportedly misrepresented the funds’ performance by approximately 2 to 3 percent annually.

The company purportedly collected approximately $11 million in excess management and performance fees from the funds that it would not have otherwise collected, according to the complaint.

The SEC is charging Direct Lending with violating certain antifraud provisions of federal securities laws.

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 appoint 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.

Recovery of Investment Losses

The White Law Group is investigating potential securities fraud claims involving broker dealers who may have improperly sold Direct Lending Investment offerings to investors.

 Brokerage firms have a legal responsibility to adequately supervise the activities of their agents. If a broker unsuitably recommends an investment the brokerage firm that employs them may be liable for negligent supervision.

If you suffered losses investing with Direct Lending Investments or another investment, The White Law Group may be able to help you by filing a FINRA Dispute Resolution Claim. For a free consultation with a securities attorney call 888-637-5510.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.

For more information on The White Law Group, visit www.whitesecuritieslaw.com.

 

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