Phil Tseng, CEO of BlackRock TCP Capital Corp., is out. His departure follows months of losses on soured loans, two separate net asset value markdowns totaling roughly 24 percent in five months, and a federal probe by the Manhattan U.S. Attorney's Office into whether the fund was deliberately marking its loan book above true value to protect fee income. The Southern District is run by Jay Clayton, who has already gone on record saying that mismarking assets to collect fees "has always been a no-no." That is not background noise. That is a former SEC chairman signaling that the Justice Department is now looking at the plumbing of the private credit industry the same way it eventually looked at CDO valuations in 2007.

Here is the problem. Business development companies like BlackRock TCP Capital are not obscure boutique vehicles. They are publicly traded wrappers that pool private credit loans, many of them made to AI infrastructure plays, data center developers, leveraged buyout targets and tech startups burning cash in the hope that the AI capex cycle never ends. The loans inside them do not trade on any active market. Valuations are set by the fund managers themselves on a quarterly basis. Investors who put money in are often locked out, told their redemption requests cannot be honored, and left reading quarterly marks that may or may not reflect what the loans are actually worth. That is not a bug in the design. That is the design, and it functioned as long as everyone agreed not to ask hard questions.