The lawsuit alleges that Cardone Capital did not listen to a SEC lawyer’s warnings.
Property crowdfunding pro Grant Cardone faces allegations that he has frauded thousands of investors across the States by incorrectly promising them yearly profits of a minimum of 15 percent and other bonuses that never came to be.
Coming straight from their acquisition of the Fort Lauderdale apartment complex next to water, Cardone and his Aventura, Florida-located company Cardone Capital were charged with violating the federal securities laws in a suit filed at the federal court in LA at the start of the month. The lawsuit states that they made untruthful statements and avoided providing material facts connected with public offerings for a couple of Cardone Capital funds gathering up to $100 million.
The funds raised money from investors via crowdfunding, counting in $50 million between 2018 and 2019, which was utilized to buy interest in a 346-unit apartment complex in Delray Beach, the prosecution alleges. Cardone Capital raised an additional $50M between 2019 and June 25, and some of the proceeds were used to buy Port Royale Apartments, a 22-acre complex with a marina located on the Intracoastal Waterway.
Luis Pino, a resident of Inglewood, Cal., who invested $10K in both funds in September 2019, is the main complainant in the lawsuit seeking class action status. Pino’s representative Marc Seltzer refused to comment.
Cardone, whose Instagram account has more than three million followers, is a property entrepreneur who has leveraged his invest cash in CRE opportunities, in the majority involving multi-family assets. Cardone is also set to appear in the upcoming Discovery reality show, “Undercover Billionaire.”
During his appearance in 2019 at The Real Deal’s yearly Miami Showcase & Forum, Cardone stated the high-profile appearances were the key to his success. During that time, he claimed that his firm had purchased over $400M worth of Florida properties, majorly apartment buildings between Miami and Fort Lauderdale. “Money follows glitter and noise and light,” Cardone said. He said that one needs attention in order to sell something, and that means having a brand.
In a statement, Cardone Capital said that it was trying to return $10K to Pino after learning of his lawsuit.
They claim to have raised more than $425 million and have one investor who has shown himself as a non-accredited investor, who has invested a min of USD 5,000 in a couple of different funds and is now trying to bring a class action suit against them.
The lawsuit alleges that a SEC law enforcement officer sent a letter to Cardone Capital in July 2018 warning the firm to withdraw claims in one of its public offerings that investors will get a distribution of circa 15% yearly returns on investment each month. The lawyer said that the complaint alleges that the firm didn’t appear to have the foundation for claiming a profit like that.
The lawsuit says that the company ignored the warnings and carried on to bundle misleading info to investors.
Cardone engaged his Instagram account to post photos and videos of himself enjoying a lux lifestyle, as well as pitching his crowdfunding business. The contents are followed by captions that proclaim that others can be just as wealthy as Cardone are by investing with his firm. For example, the lawsuit quotes an Instagram post from September 2019 in which Cardone said a USD 220Kinvestment will lead in a $660K position in one of the funds and will let investors to receive between $12K and $15K yearly in distributions.
In fact, the lawsuit claims, this statement was untrue and misleading since there was no truth for this, and the distributions of investors were a lot lower lower than those volumes.
Cardone got some of the assets with his own funds and then transferred the property to the firm’s Funds. In certain instances, Cardone offered mortgages to purchase funds, charging a 6% interest rate. Those were paid with investor cash, the lawsuit states.