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.
