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You have connected your system together and you're adjusting the various input and output levels for the best compromise between low noise and absence of distortion (which is what level setting is all about).
However, one of your input level controls is set very low. You can hear distinct distortion on peaks, yet setting the level even lower doesn't help. What can you do?
The answer is that if you have to set the input control of any piece of equipment to a very low level, then you are probably feeding it with a signal that is far too high.
Normally any piece of equipment with an output level control should be set so that the output is as high as possible. The way most output level controls work is by throwing perfectly good signal away, compromising the noise performance.
But you might find yourself in the position of feeding a piece of equipment that expects domestic or instrument levels with another item that supplies much higher professional levels. So you end up setting the input level very low.
The problem is that this doesn't make the distortion go away. The input stage is actually clipped and distorted at a point before the input level control, so the control itself can't do anything about it.
The only answer is to lower the output level of the preceding equipment.
Whenever you see an input level control set unusually low, take it as a warning sign and investigate to see what might possibly be going wrong.
(Brownie points if you recognize the picture, and what's odd about it!)