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Ninth Circuit Revives Class Action Lawsuit Over Alleged Misstatements, Misleading Projections, and Debt Deception in Cardone Capital Real Estate Offerings

🔎 INSIDE THE RULING

• The Ninth Circuit REVERSED a district court dismissal in Pino v. Cardone Capital, LLC, finding the plaintiff sufficiently alleged misleading investment statements and material omissions.
• Real estate mogul Grant Cardone allegedly continued promoting a 15% return on Instagram and YouTube—even after the SEC warned him the projections lacked evidentiary support.
• The court slammed the district court for misapplying securities law and ignoring governing precedent, including Omnicare v. Laborers District Council.

🏛️ BACKGROUND: A Promise Too Good to Be True?

In the age of TikTok finance gurus and YouTube wealth strategists, Grant Cardone stood out for his brash confidence, online charisma, and high-octane investment pitches.

“You’re gonna walk away with a 15% annualized return... 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,” Cardone told potential investors on YouTube, according to the court’s June 10, 2025 opinion (p. 4, ¶3).

Those promises helped Cardone raise capital from unaccredited, everyday investors through Regulation A offerings via Cardone Equity Fund V and VI, administered by his firm Cardone Capital, LLC.

But in a stinging rebuke of Cardone’s tactics and the lower court’s ruling, the Ninth Circuit held that Christine Pino, the daughter of late ‘unaccredited’ investor Luis Pino, has valid securities law claims under §§ 12(a)(2) and 15 of the Securities Act of 1933. These include claims that Cardone:

• Madesubjectively false and objectively untrue opinion statements;
• Omitted material facts, including a letter from theSEC requesting removal of those very projections;
• Misled investors regarding who wasresponsible for debt obligations tied to the funds.

🧑‍⚖️ THE NINTH CIRCUIT’S SHARP REVERSAL

The three-judge panel, led by Judge M. Margaret McKeown, didn’t mince words.

“Cardone’s telling reaction to the SEC letter—removing the projections without any rebuttal or comment—evinces Cardone’s subjective disbelief,” wrote the court (p. 12, ¶2).

That’s right. The SEC specifically told Cardone to remove his lofty 15% return projections from formal offering materials because they lacked evidentiary backing. He complied in writing but continued promoting those same returns to investors online—without ever mentioning the SEC’s objections.

⚖️ LEGAL STANDARDS APPLIED

The court applied the Omnicare standard from the Supreme Court’s 2015 decision in Omnicare, Inc. v. Laborers District Council:

• A statement of opinion violates § 12(a)(2) if it is:
  1. Subjectively false (the speaker didn’t believe it); and
  2. Objectively untrue (the statement lacked a reasonable basis).

Here, the court held that both prongs were sufficiently met:

• Subjective falsity was inferred from Cardone’s silence in the face of the SEC’s rebuke;
• Objective falsity arose from the fact that no underlying properties had yet been purchased and no historical returns supported the 15% IRR claims (p. 13, ¶1–2).

🚨 MATERIAL OMISSION: THE SEC LETTER

Cardone argued that the SEC letter was public, and therefore, investors could have looked it up on the SEC’s EDGAR website.

The court rejected that argument as “a backhanded effort” to dodge the law. Public availability isn’t the standard. The failure to disclose the SEC’s opposition while simultaneously pushing the same projections is what created the misleading impression.

“Constructive knowledge does not bar recovery under § 12,” the panel reaffirmed, citing Casella v. Webb, 883 F.2d 805, 809 (9th Cir. 1989) (p. 14, ¶1–2).

This means Cardone couldn’t shift the burden to investors to research omitted facts—especially when the representations at issue appeared directly in promotional videos and social media posts.

💸 DEBT DECEPTION: “The Answer Is Grant!”

In one Instagram post, Cardone stated:

“One question you might want to ask is, who is responsible for the debt? The answer is Grant!” (p. 7, ¶3).

But the funds themselves—not Cardone personally—bore the debt. The court held that this misrepresentation could significantly alter the “total mix” of information for a reasonable investor.

“There would be fewer costs for investors and thus greater returns if Cardone were responsible for the debt,” the court noted, finding the claim plausibly material (p. 15, ¶2).

📈 REG A, CROWDFUNDING, AND EVERYDAY INVESTORS

This case strikes at the heart of crowdfunded securities marketed to unsophisticated investors. Under the 2015 JOBS Act, Cardone Capital was allowed to raise money from the general public under Regulation A—a framework meant to democratize investing.

But the Ninth Circuit signaled a clear warning: Even under relaxed reporting standards, basic securities law still applies. Misleading statements, half-truths, and omissions can land promoters in court, especially when bold social media promises target retail investors.

“Section 12(a)(2) is unique as ‘a virtually absolute liability provision that does not require an allegation that defendants possessed scienter,’” the court explained, citing Miller v. Thane Int’l, Inc., 519 F.3d 879 (9th Cir. 2008) (p. 11, ¶3).

🧨 WHAT THIS MEANS FOR GRANT CARDONE

This opinion places Grant Cardone and his brand in legal jeopardy.

If the case leads to a trial, Cardone could face monetary damages, rescission of investor agreements, and injunctive relief under the Securities Act. Even without a finding of fraud, § 12(a)(2) carries strict liability for misstatements and omissions.

Moreover, this ruling invites greater SEC oversight into how influencers and entrepreneurs promote investment vehicles online.

Professionally, Cardone’s real estate empire and public credibility may now be under siege. His online persona—built on confidence, predictions, and flashy promises—is facing its greatest test in federal court.

🧭 FINAL THOUGHTS: A Case with Wide-Ranging Impact

This is more than a simple securities suit. It’s about the intersection of influencer capitalism, crowdfunding law, and federal investor protections.

In reviving Pino v. Cardone Capital, the Ninth Circuit has not only resurrected a potential class action—it has made clear that celebrity status, charisma, and Instagram success do not immunize anyone from securities compliance.

As the panel powerfully concluded:

“We are at the inference, not conclusion, stage and Pino has alleged enough to support materiality at this juncture” (p. 16, ¶1).

In re: Pino v. Cardone Capital, LLC, et al., In the United States Court of Appeals for the Ninth Circuit; Case No. 23-3512; D.C. Case No. 2:20-cv-08499-JFW-KS (Opinion filed-June 10, 2025)

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🖋 Written by Samuel A. Lopez, senior legal analyst and investigative journalist at USA Herald. To read more of his in-depth legal coverage, visit Legal Insights and Strategies by Samuel Lopez.