Core Insights

• Legal Victory: Ninth Circuit Court of Appeals unanimously reversed lower court dismissal, allowing class action lawsuit to proceed against Grant Cardone and his investment entities
• SEC Intervention Evidence: Court found compelling evidence that Cardone continued promoting investment returns after SEC questioned their validity
• Investor Protection: Appeals court emphasized that disclaiming fraud doesn't shield investment promoters from securities violations when targeting unsophisticated investors

LOS ANGELES, CA - The legal walls are closing in on social media investment guru Grant Cardone as a federal appeals court delivered a devastating blow to his defense strategy, breathing new life into a class action lawsuit that could expose millions in potential damages. The Ninth Circuit Court of Appeals' unanimous decision in Pino v. Cardone Capital, LLC represents a significant escalation in the mounting legal challenges facing the real estate mogul's investment empire.

Grant's Moment of Legal Reckoning

While Gary Cardone battles his own regulatory challenges, it's Grant Cardone who now faces the most immediate and potentially devastating legal consequences. The case centers on Luis Pino, an unaccredited investor who placed his trust—and money—in Grant Cardone's bold promises of financial returns that seemed almost too good to be true. As it turns out, they may have been exactly that.

Grant Cardone, the charismatic founder of Cardone Capital, had been aggressively marketing his real estate investment funds through social media platforms, making eye-catching promises to everyday investors. In Instagram posts and YouTube videos, Cardone boasted that investors could expect a 15% annualized return, telling his audience with characteristic bravado: "You're gonna walk away with a 15% annualized return. If I'm in that deal for 10 years, you're gonna earn 150%...”

The appeals court noted that Cardone even dared regulatory authorities, stating: "You can tell the SEC that's what I said it would be... some people call me Nostradamus, because I'm predicting the future dude, this is what's gonna happen."

The SEC's Warning Shot

The Ninth Circuit's decision systematically dismantled every major argument in Grant Cardone's defense strategy, delivering what legal experts are calling a comprehensive judicial rebuke. The three-judge panel, consisting of Circuit Judges M. Margaret McKeown, Lucy H. Koh, and Anthony D. Johnstone, unanimous in their decision to reverse the lower court's dismissal.

Perhaps most significantly, the appeals court rejected Cardone's attempt to shield himself from liability by disclaiming fraud in his legal filings. The district court had initially accepted this argument, concluding that because Christine Pino (Luis Pino's successor-in-interest) had "disclaimed any and all allegations of fraud," she could not proceed with her misstatement claim under Section 12(a)(2) of the Securities Act.

The Ninth Circuit found this reasoning fundamentally flawed. As the court explained, "fraud is not an element of a § 12(a)(2) claim," and a fair reading of relevant precedent "is consistent with Pino's argument that disclaiming fraud alone does not foreclose an entirely separate § 12(a)(2) misstatement cause of action."

The court emphasized that Section 12(a)(2) is "a virtually absolute liability provision that does not require an allegation that defendants possessed scienter"—meaning intent to deceive or defraud is not required for liability.

The SEC's Damning Letter

Central to the appeals court's decision was evidence that Grant Cardone continued promoting investment returns after the SEC specifically questioned their validity. According to court documents, the SEC reviewed Cardone's initial offering circular and sent a letter stating that his 15% IRR and distribution projections "lacked backing" and should be removed from the offering materials.

The court found Cardone's response to this SEC criticism particularly telling. Rather than defending his projections with evidence or analysis, Cardone quietly removed the projections from his official SEC filings while continuing to promote the same unsupported returns through his social media channels.

"Cardone's telling reaction to the SEC letter—removing the projections without any rebuttal or comment—evinces Cardone's subjective disbelief," the Ninth Circuit concluded. The court found this response constituted "circumstantial evidence bearing on the honesty of [the] statement" sufficient to support claims that Cardone subjectively disbelieved his own projections.

The Debt Deception Claims

Beyond the return projections, the appeals court also found merit in Pino's claims regarding Cardone's statements about debt obligations. In social media posts, Cardone had told potential investors: "One question you might want to ask is, who is responsible for the debt? The answer is Grant [Cardone]!"

The district court had dismissed these claims as immaterial, but the Ninth Circuit disagreed. The appeals court noted that if Cardone were truly responsible for the debt, "there would be fewer costs for investors and thus greater returns." This potential change in costs and returns "could alter the 'total mix' of available information in the eyes of a reasonable investor," the court concluded.

What Comes Next: The Road Ahead

With the Ninth Circuit's decision, the class action lawsuit now returns to the district court for further proceedings. Grant Cardone and his companies will face the prospect of extensive discovery, where internal communications, financial records, and other evidence will be scrutinized for signs of misleading statements or omissions.

The decision also opens the door for other investors to join the class action or file similar claims. Given Cardone's massive social media presence and the thousands of investors who have participated in his funds, the potential scope of liability could be substantial.

Legal experts note that the appeals court's decision creates a roadmap for other cases against social media investment influencers. The ruling establishes that disclaiming fraud cannot shield promoters from securities violations when they target unsophisticated investors with potentially misleading statements.

For Gary Cardone, the RICO class action lawsuit represents an equally serious threat. RICO cases can result in treble damages and attorney's fees, making them particularly costly for defendants. The certification of the case as a class action significantly increases the potential exposure.

Industry Implications

The legal challenges facing both Cardone brothers reflect growing regulatory scrutiny of social media investment influencers. Federal agencies have increasingly focused on promoters who use social media platforms to market investment opportunities to unaccredited investors, particularly when those promotions involve bold return projections or downplay risks.

The cases also highlight the challenges facing everyday investors who rely on social media personalities for financial guidance. As the Ninth Circuit noted in its decision, the Cardone funds were specifically marketed to "everyday investors" and "unaccredited investors"—individuals who may lack the financial sophistication to evaluate complex investment risks or scrutinize SEC filings.

The court's emphasis on protecting unsophisticated investors suggests that regulators and courts may continue to take a hard line against promotional practices that target this vulnerable population. For social media influencers in the financial space, the message is clear: bold promises and flashy marketing tactics will face increasing legal scrutiny.

Looking Forward

The mounting legal challenges facing Grant and Gary Cardone represent more than just individual cases—they signal a potential reckoning for an entire industry of social media investment promoters. While Grant faces the most immediate threat from the revived class action lawsuit, both brothers now operate under the shadow of regulatory scrutiny and ongoing litigation.

For investors who entrusted their money to the Cardone brothers' various enterprises, these legal developments offer hope for potential recovery. For the broader investment industry, they serve as a stark reminder that promotional statements made on social media carry the same legal weight as traditional marketing materials—and potentially devastating consequences when those statements mislead investors.

As these cases proceed through the courts, they will likely establish new precedents for how securities laws apply to social media marketing and what protections are available to investors who rely on influencer guidance for their financial decisions.

Sources:

• Pino v. Cardone Capital, LLC, No. 23-3512 (9th Cir. June 10, 2025)
• Diddy, Defamation, and the “Rule Brecka” – Grant Cardone Settles Federal Lawsuit But More Legal Fires Burn for Cardone Twin Brothers

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