Lend Academy Network Forum

General Category => General P2P Lending Discussion => Topic started by: AnilG on March 26, 2019, 01:44:21 AM

Title: Direct Lending Fund Sued for Allegedly Inflating Returns
Post by: AnilG on March 26, 2019, 01:44:21 AM
I didn't see much discussion about DLI blowing up. It doesn't look good for the fund. Those who invested in DLI, what kind of communications are you getting from the fund, if any?

Direct Lending Fund Sued for Allegedly Inflating Returns
https://www.bloomberg.com/news/articles/2019-03-25/direct-lending-fund-sued-by-sec-for-allegedly-inflating-returns

Direct Lending Fund Founder Resigns Amid SEC Investigation
https://www.bloomberg.com/news/articles/2019-03-20/direct-lending-fund-founder-resigns-amid-sec-investigation
Title: Re: Direct Lending Fund Sued for Allegedly Inflating Returns
Post by: lascott on March 26, 2019, 03:24:23 PM
Some information provide here:

Direct Lending Investments Suspends Investor Withdrawals
Leading fund manager suspends withdrawals after a large holding defaults
FEBRUARY 27, 2019 BY PETER RENTON
https://www.lendacademy.com/direct-lending-investments-suspends-investor-withdrawals/

From the investor letter:
Quote
VOIP Guardianís amounts due from these delinquent obligors is now $160 million, with the result that VOIP Guardian in turn remains unable to make its payments due to the Funds. We now suspect that the cessation of payments is the likely result of misconduct (although we have not yet determined by whom) and that a substantial portion of the $160 million may not be recoverable.
Again, here is what Brendan says in the investor letter:
Quote
The General Partner and the Board took this action because they determined in good faith that such a suspension is advisable to protect the Funds, including because it would be inappropriate to use the Fundsí liquid assets to redeem some investors ahead of other investors. The General Partner and the Board currently expect that the suspension will be in effect for an extended period of time. The Funds may make distributions and payments during this period if they determine that it is appropriate and if the Fundsí liquidity so permits.
Title: Re: Direct Lending Fund Sued for Allegedly Inflating Returns
Post by: AnilG on March 28, 2019, 03:30:59 AM
Thanks Scott. Interesting comments on LA post. Some people seem to be defending actions of DLI and Brandon and have rosy expectations. The SEC complaint has some interesting tidbits.

https://www.sec.gov/litigation/complaints/2019/comp24432.pdf

Title: Re: Direct Lending Fund Sued for Allegedly Inflating Returns
Post by: lascott on March 29, 2019, 07:53:46 PM
for years, Ross, DLIís 100% owner and then-chief executive officer, arranged with QuarterSpot to falsify borrower payment information for QuarterSpotís loans and to falsely report to DLI that borrowers made hundreds of monthly payments when, in fact, they had not.

many of these loans should have been valued at zero, but instead were valued at par, because of the false payments Ross helped engineer. The effect of this was that, between 2014 and 2017, DLI cumulatively overstated the valuation of its QuarterSpot position by approximately $53 million and misrepresented the Fundsí performance by approximately two to three percent annually.
Wowzer!  If the SEC investigation proves all that this is pretty bad and ridiculous for audit/transparency of DLI.
Title: Re: Direct Lending Fund Sued for Allegedly Inflating Returns
Post by: Fred93 on March 29, 2019, 10:04:51 PM
I've believed for a long time that DLI was failing to "mark" loans (that is show them at less value when payments were late, etc).  I believed this just because I looked at his monthly reports (which he would email to anyone who asked) and knew a tiny bit about some of the things he invested in.  The numbers were too good to be true.  Of course I never had the data to prove anything.  I'm so glad the regulators who have the power to examine the details have finally jumped in.
Title: Re: Direct Lending Fund Sued for Allegedly Inflating Returns
Post by: AnilG on March 30, 2019, 07:47:13 AM
Yeah, in hindsight, there were lot of little yellow (if not red) flags with DLI. I was surprised with the consistency of monthly returns too. I think once when debt markets were doing really bad and most debt funds were reporting much lower returns except DLI, it made me go "huh...really". But I didn't think of it much further.  I had no interest in DLI as I tend to not get involved financially/with money, with people who come across slick and with the gift of gab.

I've believed for a long time that DLI was failing to "mark" loans (that is show them at less value when payments were late, etc).  I believed this just because I looked at his monthly reports (which he would email to anyone who asked) and knew a tiny bit about some of the things he invested in.  The numbers were too good to be true.  Of course I never had the data to prove anything.  I'm so glad the regulators who have the power to examine the details have finally jumped in.

I think as an investor bigger issue is as investor how do you spot and avoid such situations. The past audit failures and reduced transparency with p2p lending is a major reasons for decline in investor interest in my opinion.

Wowzer!  If the SEC investigation proves all that this is pretty bad and ridiculous for audit/transparency of DLI.