Direct Lending Investments’ founder and CEO Brendan Ross has resigned while his company is the focus of an investigation by the Securities and Exchange Commission (SEC).
Bloomberg reported that the company revealed in a letter to investors that Ross stepped down from the role of CEO on March 18 after the company found evidence that it may have overvalued its investment in small-business lending platform QuarterSpot. The company reported the issue to the SEC, which is investigating the matter.
In a separate letter, the company also shared that another borrower had defaulted on a loan that accounted for about a quarter of its capital. As a result, Direct Lending suspended withdrawals at that time.
Ross said in an email on Wednesday (March 20) that it wasn’t an easy decision to step down from the company he founded in 2012.
“I am committed to doing what is best for the investors and to preserve the value of the fund,” he wrote.
When it launched, Direct Lending initially focused on small business loans before expanding into making larger loans to companies also in the lending business. The company has reported gains every month through at least November 2016, with Ross stating that its assets had risen about 10-fold between 2014 and 2016. It had $758 million in assets as of November.
In the meantime, the borrower that defaulted, VOIP Guardian Partners I, was focused on advancing money to smaller telecoms against their accounts receivables. It filed for bankruptcy March 11, still owing Direct Lending $191.3 million, according to last month’s letter to investors.
Rodney Omanoff, one of VOIP’s founders, claimed in a recent interview that some of the telecoms that were long-time clients stopped paying bills and that his company was not to blame.
The SEC declined to comment on the current investigation, while Direct Lending and Omanoff didn’t respond to requests for comment.