Manhattan's top prosecutor says his office is asking private credit funds about their marks

Jay Clayton, the U.S. Attorney for the Southern District of New York, told the Bloomberg Global Credit Forum on June 3 that his office is asking private credit and private equity firms how they value the loans on their books. The trigger he described was not a complaint or a tip. It was arithmetic. When most holders of the same asset carry it around 75 cents and one or two carry it at 95, that gap is where he starts asking questions, according to his remarks . "That's a place where you say, okay, I need to ask some questions about the folks who are marking it at 95, particularly if they're making fees off it," Clayton said. He added that he had asked his staff to look at that question across the marketplace. He is the same prosecutor who chaired the SEC in the first Trump administration and ran private-markets giant Apollo in between, so the people he is questioning are his former peers. For anyone funding small businesses, the useful part is the test. Clayton is not saying every markdown is fraud. He is saying a mark that sits far above comparable holders, and is set by the party collecting fees on it, needs support. Warehouse lenders and forward-flow buyers ask the same question of an MCA book or receivables portfolio: what borrower performance, reconciliation history, amendment record, comparables and cash-flow evidence support the value on the tape? The case the prosecutors keep circling is BlackRock TCP Capital Corp. The business development company cut its net asset value by 19% in January 2026, and reporting in mid-May said the Manhattan office had been seeking information about the firm. Earlier in the year BlackRock wrote one private loan, to Infinite Commerce Holdings, down from par to zero in a matter of months. A par-to-zero move raises the diligence question Clayton is pointing at: what changed in borrower performance, when was that evidence visible, and whether the file supported the value before the write-down. This is the same crack that opened up at First Brands Group, Tricolor Holdings and 777 Partners, all private-credit-backed names that blew up after fraud allegations, and all cited by Clayton as cases where the mark on one balance sheet did not match the mark on another. Private credit assets do not trade on a screen. They are valued by internal models, third-party appraisals and, as one description put it, a healthy dose of optimism. There is no shared standard, so one fund's conservative estimate is another fund's aggressive mark, and the fee clock runs on whichever number the manager picks. The operator read SMB funders sit one layer below the funds Clayton is questioning. The capital behind a channel gets priced on the strength of the loan tape underneath it. When prosecutors and warehouse banks both start treating a generous mark as a question rather than a fact, the funder who can show why a position is worth what the file says it is worth gets cheaper money, and the one who cannot gets a wider haircut. An aggressive mark can still be defensible. A funder may carry a slow-paying merchant at full value because reconciliation is working, deposits are recovering and the borrower is current under amended terms. That case only works if the file shows it. The support needs to include bank-statement velocity, reconciliation history, workout terms, dated notes on when the position started to slip and the approval trail for keeping the mark where it is. Clayton was careful to wave off the panic. He warned against "pearl-clutching" about private credit, called it a boon to the economy, and said he did not see a transmission mechanism from the sector into the broader economy. For an SMB funder, the warning is narrower: marks that used to live inside a model are becoming diligence questions for prosecutors, warehouse banks and capital partners. That pressure reaches any book sitting inside someone else's facility. Opinion A mark you cannot defend is a mark someone else will reprice for you Funds and funders with documented marks will get more trust than those with pristine tapes that break only after diligence starts. The file needs to show borrower performance, reconciliation decisions, workout terms, comparable marks and who approved each change. If the valuation is high, the support has to be stronger than the fee incentive pulling it upward. Plutus follows how capital discipline lands on the underwriting desk at plutusai.net .