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.
