Transcription
This begins me at three. We're back on the record. The time is 2:02 p.m.
My question was simple. I just want him to confirm which properties had 5-year interest-on mortgages.
W without seeing the documents on the loans. I I I I can't confirm it even though this document I believe it reflects information. No, I believe it.
Do you have any reason to believe this document is inaccurate?
I do not.
Okay. And the properties that were five-year interest-on mortgages, those were properties that have been owned since 2018 or 2019. Correct.
They were all done in 2018 and 2019.
Okay. So the had nothing to do with the loan, right? So the five-year the five-year interest period is it over for these properties? Is that right?
Anything that had a 5-year loan on it, the loan is the loan. The interest any the interest only period would be over and we are now paying debt down.
Okay, which in addition to our cash flow or current cash flow Morgan principal payown is not figured as a cash flow number or an internal rate of return number but it does impact the internal rate of return because we're paying debt down about one and a half% a year. So on these loans 100 we borrowed um three or $300 million we'd be paying four$4.5 million maybe $5 million of principal down every single year.
Okay.
And would have now for uh four years. So about $20 million in principal has been paid down in addition to whatever the audited returns you just showed me were.
Okay. Cardone Capital recently refinanced the Sawrass property, correct?
Yes, ma'am. We did.
When did that refinancing occur?
In the last three weeks.
Okay. I'm going to mark this as exhibit 239. Now, we done with the um
Yes.
238. Joe, thank you. I will never see pink without thinking about you.
I will never see pink again without thinking about our time together today.
Okay. Do you recognize this? This is a post from this month.
Yes, I recognize it. I did this post.
Okay. It's from your account at Grant Cardone, right?
My ex account. Yes, ma'am.
Yes. And you're announcing the Sawrass refinance, correct?
Yes, ma'am. Alert investors of fund five.
Yep. This uh Sawrass property is owned by Cardone Sawrass Member LLC. Correct.
I think that's right.
And fund five has a 24.27% ownership interest in Cardone Sawrass member who does fund five.
Okay.
Is that right?
I don't know. I'm not looking at that. I'm not looking at the accounting on it right now. But you know, you're in the neighborhood. Fund five shares the ownership interest in Cardone Sawrass member with fund four right
there's three basically three members
who's the third member
fund it would be fund five fund four and my member
right
so when you say here sawrass property fund five just complete refinance event returning $11 million that's not 11 million that's going solely to the investors of fund five right
well should have said investors fund five. I mean, if you want it per the contract they would have said investors fund five and fund four and oh Grant Cardone but I don't post to myself. So Sawrass Property Fund Five completed a a refinance event returning 11 million. That's a mistake, by the way. Just just so we we really screwed up on this one.
You're going to tell me it's higher, right, Mr. Cardone?
No, it was 14.2 million. It was 3.2 million higher,
Morgan. At 3.2 million. It was 30% higher than what than what we told the investors it was going to be because we underpromise and overd deliver.
And this is the ultimate wealth formula. By the way,
Mr. Cardone, I haven't asked a question. the money that is here, whether it's 11 or 14, that's going to be shared between fund five, fund four, and you. Correct.
That's right. That's 100% right.
So, you're not returning $11 million to fund five specifically, right?
No. And we did a Zoom call on this last night to further further go over in detail with uh was it last night or the night before? couple nights ago to go over in detail in addition to take phone calls from and have a portal for each of our investors so that they can actually see how much money they would have gotten back. The distributions didn't go out until today. Um, coincidentally the the same time I'm doing a deposition with you,
Mr. Cardone. Are those calls recorded, Mr. Cardone?
Uh the Zoom call. I don't think that Zoom call is recorded, but I'm not sure.
Are you taking a refinancing fee?
Uh we might be. I don't know.
You don't know?
I'm not sure at this time,
but you might take out a refinancing fee out of that amount.
Objection. The foundation.
I would take out whatever I'm do if whatever I'm allowed by our agreement.
Okay.
Whatever I'm allowed to do by our agreement. Uh, I will I will take
Okay.
Or or I might decide, no, I don't want to take it this time. I want to pay the investor all the money and I'll wait for mine later.
But you'll take it eventually. Right.
We already covered that. I said maybe I will, maybe I won't.
For the if it if it hits a super home run, then I'm definitely going to take it and I'm definitely going to go to Sanro Bay. And you're allowed 35% of this return, right, from the refinancing?
I don't think so.
You don't think so? Okay.
I don't think that's what our agreement says. I think I need a return of capital before I would achieve that with with with fund four.
Now, on the membership fees, on my fees, I mean, I'm not going to charge a promoter myself. It would be taking money from one place, putting it in my other pocket. It would be unnecessary. for the properties that Cardone Capital has not refinanced. Delray 10X at Breakfast Point and Bandage at PCB.
And you said Cardone Capital is now paying down the principal.
Yeah.
On those properties.
What was the cash on cash return for 10X living at Breakfast Point in 2025?
Let me guess. I'm not looking at the documents. What?
You don't know.
Four and a half%. Let me guess. Do you know what the cash on cash return was for Vantage at PCB in 2025?
Panama City probably four and a half%. It's a weak market right now.
I didn't sorry
that name Vantage or Ant
10X Vantage.
Panama City is a weak market. Oops. Sorry.
May cash.
Do you know the cash retire was 14 next
Mr. on you. You were just saying PCB is a weak market.
I said uh Panama City is a weak market.
Okay.
It's a weak market at this time. So, it could have um could have done four and a half. Could have done four. I don't know.
I think we projected a three there, 3% cash flow. I'm not sure. I'd have to go back and look at our little box, but it had it in there. The box that the SEC included,
I'm asking about 2025. So that
3% cash on cash.
Anything north of that would have exceeded what we uh what we shared with the SEC.
So it was your promise that the funds would return a 3% cash on cash return. Is that what my promise? That wasn't my promise. That's not even testimony.
I didn't say anything close to that.
I suggested that the properties would do a 5 to 6% cash flow. That's always my target, by the way. Unless it's something that we're like, "No, we're not going to hit a four and a half. We're going to hit a I'm doing a deal right now. I think it's going to do a two and a half% cash flow per year." They're all different, Morgan. They're not They're not all the same. I've never presented them as all the same. They're like kids, you know? If you have kids, you love them all, but they're all different. They're just different. I just have one kid, so
Well, you should have another one. You should have another one because they're phenomenal. It's easy to have a favorite. Have one.
Exactly.
Well, your first one will probably always be your favorite, too.
Any parent that says they don't have a favorite is a liar.
Everybody's got a favorite,
right? Um, I'm going to mark this.
You have a girl or a boy?
It's a boy.
Oh, good for you. I didn't have any boys. I'm going to mark this as exhibit 239. 240 240. All right. Now, do you recognize this Instagram post?
There looks like there's seven posts here. Which one you want me to look at?
Yeah, it's just the top one.
Okay.
The bottom are just additional posts that printed with it. How did your team go through all my post? That's what I want to know. How big is the team that went scraped all the stuff that I put on the internet? Because that had to be a job.
All right. This is from your Instagram handle, right?
That's my Instagram handle. Yes, ma'am.
Okay. And do you or is this Instagram or X?
I believe this is Instagram.
Okay. All right. If you say so. It says, "Did you get your check? Every month, I send over $3,000 of our investors mailbox money. Some invest as little as 5,000 and others millions. $100,000 pays $500 a month. A million pays you $5,000 a month. 10,000 10 million pays you $50,000 a month." Uh, and let's stop there for a second. The date of this post here is January 31, 2020.
Yes.
Right. Okay. Funds 1 through three only had 192 investors total. Correct.
I don't know. Have no clue. If you're asking me to remember us how many how many investors we had in every single fund that I've done, I've done 47 funds.
That's Yeah. Mr. Cardone, in your interrogatory responses, it says uh in addition, prior to the formation of funds five and six, defendants had previously raised capital through three regulation D offerings, Cardone Equity 1, 2, and three, which raised an aggregate of 58,130,000 from 192 investors. Does that okay refresh your recollection?
Morgan, where are you?
Where are you in exhibit?
I'm on interrogatory nine.
Nine.
That's obvious.
I'm not contesting it. I just don't know.
Okay.
And I'm just telling you that that's what Cardone Capital put in its interrogatory responses.
That's that's good. But I have 20,020 investors today.
Right. So here this post is dated January 31, 2020.
Mhm.
And when you said, "Every month I send over 3,000 of our investors mailbox money."
That's right.
You must be including
period end into sentence. Send a sense.
Yes.
Sense.
You must be including in that statement the investors of fund five, right?
Of course.
Okay.
Of course. Of course. How about my family? Of course. How about me? I send myself a check a check. Anybody that got a check would have been included in the 3000.
Right
now, I can promise you with almost 100% certainty that this advertisement was not completely fact checked because the chances of it being 3,000 exactly is suspect. You know, I I have a saying, never never trust a number that ends in zero. They're just not trustworthy because they're lazy. They're lazy numbers. Very seldom will you end up with an actual zero at the end of a number. But so I'm just telling you, just being completely honest to everybody listening or watching this right now, the ch the chance of it being 3,000 exactly and not 30,0001 or 29.99 is is uh is suspect. But and this would not continue. Two months later, I would not be able to say this. other the next sentence or or the the second half of the sentence.
The I guess my my question is pretty simple.
Okay.
If you were not including fund five in this post. So fund five has you didn't have
3,000 investors at the time of January 31, 2020, not including fund five, right?
Why? Why do you keep talking about fund five?
What I'm trying to understand is the investors that you're
This wasn't an ad for one for fund five.
I understand it's fund six.
It wasn't an ad for fund six either. Where do you see the ad for
the advertising for fund six?
This post is dated January 31st, 2020. Right.
Yeah.
And it says, if you actually look on the right, for our current regulation a offering, right?
No.
Okay.
Objection. It misstates the document.
Um, Mr. Cardone, but what I'm trying to understand is the 3,000 must encompass the investors of fund five because without fund five, you did not have over 3,000 investors, right?
This is not an ad for a fund.
That's not my question. My question is simply
that as of January 31, 2020,
okay,
if you subtracted out the fund five investors, you didn't have over 3,000 investors, right?
Why would I do that? Why would I Why would I subtract out the I I again I don't understand. I'm asking if this post is referring when you say every month I send over $3,000 3,000 of our investors mailbox money
if you're including in that the investors of fund five.
I have no clue.
You don't know?
No.
Prior to fund five
and not
prior to fund five did you have over 3,000 investors?
I don't know.
You don't know?
Have 20,000 and 20 today. That's what I know. It says here, as we discussed, that funds one through three had a total of 192 investors.
Okay.
And
how many how many did fund five have?
Fund five has, I believe, over 2,000 investors.
Mhm. 2,200.
So that's likely being included in
How many does fund four have,
Mr. Cardone? You tell me.
I think it has 4,500.
Okay.
2200 plus 500 is 2,700 plus 192 is 28.92. Plus my family name. I'm probably [ __ ] excuse my language, another eight people. I'm at 3,000.
Okay. Okay. So, I think we're on the same.
My sister, my brother, my nieces, my daughters. We're probably going to right at 3,000. I might even hit that actual number, exact number, as weird as that would be, okay,
to believe.
All right. So, we're
But this was not an ad for fund five or fund six. And I think you're confusing this this concept of real estate education with an ad.
You say
at this time I can I just explain one other thing that might be useful.
Mr. Hardone, I have to ask the questions here. You say in this post
the the SEC had required us and requested us to now start putting uh on all post a what's that called?
Disclaimer.
A disclaimer. And that's why that disclaimer was there on this deal,
right? Because this is a test the water communication, right?
Objective. It wasn't It wasn't test the waters to me, but I understand what the the term you're using.
Okay. You say in this post $100,000 pays 500 a month, right?
That's what it says.
Okay. That's a 6% rate of return, correct?
I think that's a uh Yeah, that that that would be a a 6% if it achieved the 500.
What's the asterisk stand for? There's there there's an asterk there.
You tell me, Mr. Cardone. I
I don't remember the post because it's been 72 months.
The
and it's probably one of 14,000 posts I've done. So, I don't know what the asterk is, but there's a reason for that asterk being there. I'm going to mark this as exhibit. See where we 141.
241.
Oh my gosh. One of these days I'll get the number. Sorry. Yes. Thank you. That's very helpful.
Yes.
Doesn't print out here.
We done with 240. 239. 240.
No. Please hold on to 240.
Okay.
Do you recognize this document?
It looks similar to the other the the 1K you sent me you showed me earlier. Okay. And you this is um an annual report filed by fund five, right?
Yes, ma'am.
Okay. For the year ending 2019, correct?
Okay.
And if we can turn to page five.
Okay. And in the last second to last paragraph, do you see that
the company's management team?
Yep.
Okay.
And it says in the second sentence, during 2019, the company received monthly distributions from the operations of the multif family properties totaling 1,499,389.
Mhm.
and distributed a total of 1,285,52
representing a 4.5% annual rate of return to its class A unit holders.
Mhm.
No distributions were paid to the class B unit holders, the manager. Do you see that?
I do.
Okay. By the end of 2019, Cardone Capital had only made distributions to members of fund 5 at a 4.5% annual rate of return. Right.
I see that.
And it didn't pay any distributions to the class B member Cardone Capital. I see that
Cardone Capital would not have been able to distribute a 4.5% annual rate of return to its class A unit holders if they had only received 65% of the operating profits. Right?
Cardone Capital could have achieved a 5% margin had they just delivered the extra 200 grant. So, we withheld $200,000 here. You notice it says we sent out 1.5 million and distributed a total of 1.285. That means we probably held $200,000, maybe $210,000 back for some capex, some expense so we don't exhaust our cash accounts because we want to take care of the asset. Did I get paid? I think you're asking me did did Cardone Capital get paid their promote fee on that year? No, we have we have delayed that that we have delayed it to a future that may never come and we may never get.
So as of January 2020, which is the date of this post,
okay,
an investor in fund five who had invested $100,000,
that's right,
would not have received $500 a month. Correct. This says what they received.
They received 4.5%. Right?
And there's 200,000 sitting in a capex account. Guess who guess who owns that 200 grand?
They receive owns it 4.5.
That's their that's members interest in the LLC. You understand? When the money stays in the LLC, I don't own it. I don't touch it. I don't get paid by it. members which are your your class action prospects would be the members owning all the cash in the account all the capex sitting in that account that they they own that I don't own it now regarding the Instagram post 100 grand was projected expected. And again, you're missing the asterk. I expect the asterisk suggest this is on a projected return assuming a 5% on $100,000 earns. But but this again, this this post had nothing to do with this offer right here. These are completely separate.
Mr. Cardone, it
the asterisk that you rep you were talking about.
Yeah. In the post itself, it doesn't tell you what that asterisk might be, right? It's
somewhere. You go find it. It's somewhere there. There's an there. That asterk moves to something somewhere.
You got to go searching for it, right? It's not in the actual body of the post.
I have no clue right now. This is seven years later.
Okay.
Seven years and probably 10,000 posts later.
And we just established that
and no financial harm or damage to anyone. That's the crazy part of this.
Move to strike. the last part of that because you don't you you the only way you understand the only way that any of these people lose any money is if you guys actually won this lawsuit
move to strike down.
The only way anybody would lose money. There is no world in the future where these investors lose money. Period.
As of the date of this post, January 31, 2020, the investors in Fund 5 had only received a 4.5% distribution. Right. Cash distribution would not be a complete picture of what is available.
You estimated that with what's available it would be 5%. Right.
Without doing all the math I think we'd be be hitting right at a five. But again, the box that we delivered to the SEC suggested a three that they they they included in their their uh approval submitt.
You know what I'm talking You remember what I'm talking about, right?
I do, Mr. Cardone. But this post right here says $100,000 pays 500 a month, which is a 6% return. It doesn't say 3%, right?
That's one line. It also says I sent out 20 million last year. More importantly, it says our investors have their capital sitting next to mine protected waiting for appreciation. We targeted to sell properties when I return the investors. See that? We target misspelled we TT target to sell properties when I can return to investors two to 3x their investment. And if your money doesn't work for you, you will spend your entire life working for your money. Like there's no misrepresentation here. There's no fraud here. There's no
Mr. Cardone as we read in the 2019 form 1K for fund five Cardone had distributed a total of 1 million285,52 dollars to the investors in fund five. And here it says last year I sent out 20 million in distributions. What makes up the other approximately 19 million in distributions?
19 million If you sent about 1 million
to fund five, what makes up the other 20 million?
What fund is this?
I don't know. You tell me.
There are you understand there's 20 there's all these other funds like I I you have a list of every deal that I have here. They they all distribute cash to to to investors. There there's more here involved than Lewis Pino. I have been distributing money to family and friends, extended family for for years. In that year, if I said that I distributed 20 20 million to our investors, we did.
What could I look at to know those figures? You'd have to have Yeah, you'd have to have access to all my distributions
and you have that information. It would show
I reported uh
I reported uh to the IRS for since I was 18 years old.
So if you want to go back till 50 years, you can. And
those tax returns would reflect that you've spent sent out 20 million in distributions. It would also reflect it on the taxpayer that received the money. Okay?
And every one of those, every one of our investors got a K1. K1 in would include income, passive income, active income, and taxable income. It would also include a write-off. That same year, we probably sent out uh $100 million of depreciation, andor tax write-offs to our investors the regular people never get access to. The post goes on, as you read, to say, "More importantly, investors have their capital sitting next to mine, protected, waiting for appreciation." Right.
Does Cardone Capital guarantee that investors will get all of the money back that they invest?
Cardone Capital can't make guarantee. The SEC made it very clear. Now, Grant Cardone, you know, I'm so confident in my assets and the selection of them. As long as I have enough time, dude, I put a big G on all this, okay? Short of nuclear devastation or a hurricane or a fire. I mean, even in a hurricane, we're not going to have a loss because it's insured. Even in a fire, we're not going to have a loss because it's insured. I mean, the only way anybody loses their money with me, Morgan,
is if there's a nuclear event. And in which case, nobody probably cares about their money at that point.
Earlier in response to my question, you said Cardone Capital cannot make guarantees. The SEC made it very clear.
Earlier, you said Cardone Capital cannot make the guarantees. The SEC made it very clear. What what did the SEC make very clear?
Well, you remember when they asked me, hey, would you ple would you please remove the 15% internal rate of return? So, we did
also the circular the circular offering says
it makes it very clear in the circular offering this is a risk goes over all the risks. There's so many risks. I think there's in our in our offering circle, there's probably 12 pages of risk.
We're an emerging growth company.
Mr. Cardone, let's look.
Investments in real estate and real estate are speculative. Like it's this
exhibit. Yeah. Yeah.
What on Marcus exhibit 242?
It goes on and on describing the risk involved for every investor. We made sure that we complied with the SEC and made sure they knew that too.
Or the uh our we made sure our investors knew that. Thank you.
Do you recognize this post, Mr. Cardone?
I do. Okay.
And this is from Cardone Capitals account. And it says the uh an investment. It's advertising that if you invest a million with Cardone Capital
Mhm.
you're going to get $50,000 in yearly dividend income, right?
It's not what it says to me, but I can see how you would see that.
That's a fair interpretation of the post, right?
Objective form.
Fair. Fair. Fair is all in the highest of the beholder. you. That's what you see. That's not what I see.
What do you see, Mr. Cardone?
Thank you for asking. I see me comparing what it would take to earn $50,000. If you invested in Apple stock, you would have to put in $3 million, buy 17,000 shares of Apple stock at that time. That would be different today. or a million dollars invested in Cardone Capital if we hit our 5% would achieve the same cash flow. I'm basically making and I made this post by the way, take full responsibility for it. Uh I'm making a comparison between a a projected 5%. How can you type and listen to me at the same time?
I'm listening, Mr.
That's amazing. uh between a 5% cash flow real estate transaction and a and a 18% dividend by Apple computer or Apple stock. That's what I'm doing there. Now, you didn't see it like that. You saw something different. But that's why advertising is so important. Based on the 4.5% annual return that Fund 5 actually paid to investors in 2019,
as reflected in the form 1K we just discussed.
Yes, ma'am.
An investor who invested $1 million in Fund 5 would have only received $45,000 in distributions. Correct.
This is not an ad for Fun Five. I I I don't know why you keep thinking these are ads for fun five.
Is there anything?
This is a comparison between Apple stock
and our projections at Cardone Capital.
Mr. We also did Raj tried to grill my guy Ryan about a a checking account that pays one2. Am I going to meet Raj?
Maybe
I want to meet
RH AJ
the
he he tried to compare a 0.12% checking account to to a to a 5% cash flow deal. It's just you you're you're you're not being you're being disingenuous to suggest that this was an ad for fun five.
I'm have to strike all of that as nonresponsive. My question was a lot of a lot of talking you keep striking.
Yes.
There is that question was really simple.
Okay.
For an investor in fund five who invested a million dollars
Yes ma'am. In 2019, as reflected in the form 1K that we just looked at, they would have received only $45,000 in distributions, right?
Not as of last night.
As of 2019,
it's not the way the real estate works. I don't know what to tell you, dude. Like, you're just going to go round and around here. You're like, you're trying to They got tax write offs. You understand this is passive income, not taxed. Deferred taxed on the entire 45,000 would represent about $67,000 of non-t taxable income to these people that would never be privy to this tax write off had I not put this together for them. Okay. Number two, as of last night, and you guys should have before you got in this case, you guys should have done all the math on this. Last night, I delivered $14 million to our investors. 14.2 million. Another eight today. We're going to do it to Del Ry again. It's going to be $30 million. It's going to reduce that entire account sitting over there by another $30 million in the next three months. Every time that happens, all these numbers in the past change and I get closer and closer to my five. And then what'll happen, Morgan, is I'll exceed my five over time.
I'm going to move to strike all that as nonresponsive. I'm going to move on because you're not answering my question.
I am answering your questions. I'm You're just not getting what you want. The I'm going to mark this as exhibit 243.
I've seen this before.
You recognize this?
I recognize the guy in there, too.
Mhm.
This is an Instagram post from Cardone Capitals account, right?
Okay.
It's a video that you recorded, right?
I didn't record the video, but I
You're in the video.
I'm in the video.
Yes.
And in advance of this deposition, did you go back and rewatch the video in this post?
Did I? I I don't think so.
Okay.
But I know the video. I know this. I know exactly what I'm talking about here. I know what I'm doing here.
Okay.
I know where the video was taken from. So, you're aware then that in this post you say that 220 in Cardone Capital buys you a $660,000 position in our fund. That's going to pay you 12,000 to 15,000 a year and every 5 to 7 years we're going to be sellers of that property. Right.
I don't believe it said that.
We can we can watch it, Mr. Cardone.
Okay. But
what do you believe that this post said? I believe that video is saying $220,000 cash position buys a $660,000 position in that real estate
Could you repeat? I believe I say it.
The $220,000 position cash position buys a $660,000 position in that real estate uh purchase in any real estate purchase. Now, I'd have to go back and watch the real the the the video in real time, but I for this is not an ad. I don't think this is an ad for Cardone Capital. I think this is a course I'm doing on a weekend and I'm talking about using leverage Morgan 220 by 660. As you know, I don't buy $600,000 real estate. We buy big deals, but they're 220 in this example would buy a 660 position.
Mr. Fadron, I put the link to this video in the Zoom. Can I watch it?
Yes,
let's do it.
He's going to play the video out loud.
The video is going right now.
See, I'm showing in the background is a property called Morano.
So, this video,
Mr. Cardone, I haven't asked you a question.
Okay.
What was the property name?
Somebody else has their audio on. You guys, you guys got issues. Oh, it's it's Grants.
Does anyone know the pop say?
Morano.
Morano.
Morano's in the background.
Wait, we have two more kids. This is what it's going to feel like all the time.
How do I get rid of the Zoom, guys?
Yeah.
Oh,
okay. Then how do you get rid of it, though? We got to mute
mute me.
We have to disconnect.
Disconnect his.
Yeah.
Let's go off the record for
We're going off the record.
This is insanity.
This is
We're back on the record. The time is 2:57 p.m.
Where we left off was that we were going to watch the video that accompanies this Instagram post.
Mhm.
From September 17th, 2019.
Yes, we're going off the record. The time is 2:58 p.m. We are back on the record. The time is 3:01 p.m. Thank you.
I can't sleep, but I can't.
My colleague is going to share his screen so you can watch the video.
It's dead right now. Get your equity out and get it to work. 220 at Cardone Capital would buy you about $660,000 position in our fund that is going to pay you about 12 and $15,000 a year and every 5 to7 years we're going to the sellers of that property and we sell the property I expect your 220 to be worth this is your house going to 660 did you get a check while you waited cashless the house doesn't provide you with cash flow no into my house. Wilbur Red has got one door.
Don't let
Okay. So, does that refresh your recollection about what you said in this video, Mr. Cardone?
Yes.
And it said
I I I was never having a refresh issue.
220 in Cardone Capital buys you a 660,000 position in our fund. that's going to pay you 12,000 to 15,000 a year and every 5 to 7 years we're going to be sellers of that property. Right.
Again, you're you're conflating two conversations going on here. This was not this was cut out of a course. This video this video was cut out of a course. Uh it's got uh 500 likes. Can I see Can I see where that is again?
Mr. Cardon, I'm I was reading a verbatim quote of what you said.
Well, you can I just finish up what it is, what what I remember to date. You asked me if I refresh my memory. I'm just telling you what I think that this was cut out of a course talking about 220 by 650. And then I say in our current fund, 220 would also buy about $660,000 of real estate. Five to seven years, we expect to sell that asset. expect that asset. The 220 buys a 660 position. So, I stand by this video. It says what it says. And I think I say that it's going to it's going to earn 5% a year while we're in it.
Well, a 220,000 $220,000 investment that pays about 12,000 to 15,000 a year, which is what you said,
that's a cash on cash return of between 5.5 and 6.8%. Correct.
Say again.
If you a $220,000 investment.
Yeah. It pays 5% would be $11,000 a year.
Right. But you said that's going to pay you 12,000 to five 15,000 a year. So that's about a cash on cash return of between 5.5 and 6.8. Correct.
I agree with that.
Okay. And as we discussed before we went on break, Cardone Capital had not paid out a 5.5% return to investors in Fund 5 as of September 17th, 2019. Right.
I didn't say that. You said that because I said that you don't want to hear is the 5% cash flow when you're paying down debt andor saving for capex and or just preserving capital in the uh special entity which the members own. They have access and still own that cash. The pure cash flow that would hit their accounts was probably four and a half percent um net of taxes which is probably 6 and a.5% um adjusted for no tax event.
But as you said it would be about 4 and a half% of what actually hits their account. Right.
That's right.
Okay. At the capex,
capex
capex c a pex.
At the time you made this statement in September 2019, you had already purchased some of the properties that were part of fund 5, right?
I think we purchased two of them at that time.
One of the properties was Delray, correct?
10X Delray.
I think we paid $101 million for 10X Delray. I'm going to
introduce exhibit 244. Yeah. No, we paid $94,000 $94 million for 10x Delray.
Do you recognize this document?
Yes, ma'am.
What are we looking at?
I'm looking at 10X Living at Del Ray
and
exhibit 244. Does this appear to be the part of the underwriting that was conducted for tennis living at Delray? Uh, I don't know what this last sheet is, but I'm looking at a 10-year performer starting with a 2008 actuals. In year one, we hit 2% cash flow. in 19. This says 3 67, but you just said I just hit four and a half.
Well, I didn't say that, Mr.
Yes, you did. Actually, you did.
You said that.
No, you did. But anyway, let's not argue. It said year three I'll hit a 4.96 and year four I'm projected to hit a 5.6.
Why don't we Why don't you let me ask some questions? Although you you're going through a lot of them.
So, this second tab here This is part of a tab of the spreadsheet
that reflects the 10-year forecast for Delray and it says 2018 actuals, right?
I see
on the far left. Okay,
I see that.
So, that's what actually occurred in 2018 for the property, right?
Are you on the front page or the second page?
I'm on the second page.
Where does it say 2018 actuals?
At the top. Right up here it says 2018 actuals.
Yes.
Okay. So that column there is reflecting what actually occurred in 2018 for the 10X living at Delray property. Right.
That's what it says.
Okay. And you see at the bottom where it says cash on cash return to fund.
Yes. 2.02%.
Okay. So, in 2018, the cash on cash returns for Delray were 2.02%. Right.
Yeah. What what what month what month did we deliver this at? What what month did this close?
Mr. Con, do you know what month?
Uh that's why I'm asking myself. Sometimes I talk to myself.
Sometimes I just talk to myself. Oh, yeah. Now I got it. I got it. 927 2018. The 2% margin would have to be calculated based on the fact that we only own the asset for two and a half months.
The first, excuse me, the first probably 18 months of ownership are going to be the toughest, particularly in a new asset different than an asset that maybe is five or six years old. This was a newer asset that was getting stabilized. So you're going to notice that we're full disclosure to everyone, our investors, the IRS, the SEC, it's not like so all these agencies are involved in this 2% year 1, 3.67% year two. And none of our investors are complaining about this. Year three, we're on track for 4.96. We would have achieved that, by the way. Year four, we would have achieved 568.
So,
and I'm taking my I'm taking my management fee across the board as well, which I know you're curious about.
Okay. So, Delray, when you bought it, you're saying it wasn't stabilized yet, right?
10x Delray.
Mhm.
No, it was stabilized 10,000%. We don't buy anything that's not stabilized, but it can be new. It could be you could be a stable teenager and still not productive. This was a stable asset but not yet productive in in bearing fruit.
Mr. Gardone, you said the first 18 months
the properties I believe you said the property is not stabilized yet.
I didn't say that. If I did say that, I used the wrong word. It was stabilized. I I don't I wouldn't have said that either. You can run the tape back. I didn't say it wasn't stabilized. It is stabilized. We don't buy assets that are not stabilized.
It's part of our promise.
In 2018, the cash return of this property was 2.02%.
That's what this says.
Okay. And in 2019, it says 3.67%.
That's right. $1.2 million we sent to our investors.
Okay. and you knew then so this is all 2018 2019 and the post we were just looking
you don't want to go over the next years you just want to go over the two
well Mr. I'm looking at what your knowledge was at the time that you made
Mhm.
this post on September 17th, 2019,
the video post.
Yes.
Yes.
And at that point, the Delray property had never generated above a 3.67% cash on cash return to the fund. Is that right?
That's exactly right. However, I have 46 deals that have exceeded those returns since I was 31 years old. So, I'm not relying on Delray, by the way. I'm not even pitching Del Rey in the video. There's no mention of Delray in the video. And there's going to be five deals in Delray. We know there's going to be somewhere between four and six deals in the fun five. I'm not I'm not talking about any one deal. the all all five of them combined some doing better some doing worse can still over time achieve the returns that I'm seeking or targeting or projecting a move to strike as I'm responsive everything that was said after that's exactly right Mr. Cardone. Let's look
at exhibit 245.
I don't know why you don't challenge the 9% cash flow.
Just giving Raj head head heads up. That's that's what he ought to challenge.
All right. Do you recognize this document, Mr. Cardone?
Yeah, I've seen it before.
Okay. This is
It did very poorly on Instagram.
This is a post dated October 28th, 2019.
Mhm.
And it says, "Is my capital safe?"
Yeah.
And on the right here in the caption, it says, "Grant has been investing in multif family real estate for over 30 years."
Same. It says grant
has been investing in multi-state multif family real estate for over 30 years. We're extremely selective in our vetting process only choosing strong multif family properties typically class A or typically a class in top tier high growth markets. Cardone capital is built on real assets which are already established and stable in nature. Mr. Mr. Cardone, I had understood earlier that what you were expressing was that the first 18 months of a property, the property is getting established, right?
Okay.
Is that right?
It says we buy stabilized assets in great locations. And I just said to you a few minutes ago, you know what I said, they mature. It's like a young teenager is what I said. So they still have to mature
that has stability. Your son's going to grow up, be a very stable, good kid, and then he's going to start maturing and bearing more fruit. That's what these assets did. They matured. This is Look, I'm using the same real estate philosophy that Sam Zel built a $5 billion real estate portfolio. Avalon, Camden, these are some of the most successful real estate investors on planet Earth. by stabilized assets. Do not build anything. Mature them over time. Wait for rent growth. Distribute cash to your investors. Wait. Be patient. They're trying to find something wrong with this. There's nothing wrong with this. Say it's a perfect investment plan. I dropped a question. Sorry. You would agree that real estate investments carry the risk that a property does not appreciate in value, right?
Uh I've never said that. Have you ever heard me say that? I expect the real estate to appreciate in value.
They don't carry the risk that properties do not appreciate in value.
Not while I've been on this planet. So since 1945, rents in this country have doubled every decade. If I would have just simply bought everything, all the real estate that I grew up around, I would be so rich today. It would be unbelievable.
This post does not include any language warning investors that they could lose some or all of their investment. Correct.
I think it does. It's got First of all, this is not an offer. Says it down there below. This is not an offering. you just cut it off or somebody cut it off. So you think the disclaimer that's below that sufficiently warns investors that they could lose some or all of their investment is
100% sufficient exactly what was required of the SEC and all the government agencies that were involved in the approval of us raising funds under Barack Obama's job act which encouraged people like me to provide institutional quality assets and democratize those assets to regular people. This was what his wish was. I didn't put the the law together. He did. It was amended by Congress in 2012 and we've been very successful utilizing.
I'm going to show you what was previously marked as plaintiffs exhibit 16. We'll wait.
There's a video.
Yes. Do you recognize this? No.
Oops.
You don't recognize this post? I
I mean, you're showing me one screen of a video. So, there's a video behind this,
Mr.
I don't know what year this is.
As Cardone
Capital's corporate representative, you were asked to be prepared to discuss the basis and support, if any, for this post.
I am very prepared. Okay. You didn't go back to try to review this post and understand.
I didn't see this. I I've spent three or four days preparing for this. I did not see this one sheet of paper. I'm sorry if I missed something. Yeah, I think you're slightly misstating the deposition notice. The deposition notice says the basis and support, if any, for the following test the water topic 39. the basis and support if any for the following test of water communications targeting investors in fund five.
You just ask me if I recognize this and I'm just telling you right now it to be honest with you I I've not seen this one particular piece of paper that you're showing me right now. Okay. So I could have missed it. I'm a human being.
That's all right. Well, let's discuss it. Mr. Cardone, it's from it's from the Cardone Capital official account, right? Okay.
I'm sorry, Morgan. Um what what of the subsections? This is subsection six. The representation on May 5th, 2019 of a 15% targeted IR monthly distributions and long-term appreciation. Cse second amended complaint paragraph 57.
Okay. All right. So it it doesn't say watch the video. That's my point. It's what is the basis for 15% targeted IRR representation? If you believe you do not need to watch the video to understand the basis for that, Mr. Cardone.
No, I mean I would want to watch the video because see I just realized this is a video. That's that's my problem. I didn't watch this video. So when I was running through these pieces of paper, you know, there's a chance the little white triangle that represents play got lost while you guys took a copy of it over the long-term appreciation. So, had I known to watch that video, I would have watched it. Then I'd be ready for it like I was the last video.
Mr. Cardone, this post appears to have been deleted from Cardone Capital's Instagram. Do you know why it was deleted?
Check out this. No clue. I doubt it was deleted. It's probably archived. You'd probably have an archive of it.
No, Instagram would have an archive. Instagram? I don't I don't I don't own meta. I wish, but they they there's an archive feature.
This says, let's let's look at the post. It says 15% targeted irr monthly distributions, long-term appreciation. We purchase only high quality institutional assets. Mhm. Funds open for nonacredited and accredited investors, right?
Yes. And the nonacredited funds would have been funds five and fund six, right? Okay.
Fundraising for fund six started in early 2019, right? I don't know the exact date right now, but that that that would seem appropriate. We had finished fund five and probably those guys were starting to raise money for fund six.
Yes. As of May 5th, 2019, had fund six commenced operations? As of what date? May 5th, 2019 had fund six commen
I'm not sure of the exact date. I'm happy to get that for you though.
As of May 5th, 2019, had fund six made any distributions to investors? Two of the assets would have closed in fund six by February March 2019 if I recollect this correctly. And would they have started to make distributions?
Of course. Of course. And then two more deals would have closed the following year. But anytime we close a deal, we're probably 45 days from close. If January 1 is the close, I'm just making this up. February 15th is probably our first cash distribution. In the meantime, the members, our investors own that percentage of cash sitting in that account. Not me, not Cardone Capital. It's just a matter of time when they get it.
Which of the two properties for fund six were you invested in as of May 9th, 2019? May 5th, 2019?
Probably the Maryland property and I would expect uh 10x PCB. I'm just going off of pure memory right now. PCB PCB
And did either of those properties project at 15% targeted IRR?
I I I I only buy properties that I believe can can achieve a 15% internal rate of return.
Mr. And let's look here at interrogatory. Let's go back to exhibit um 231. This is the fourth set of interrogatories. I think it's actually right under your phone.
Okay. You're on your game. You're working your side and my side. And on page five.
Okay. Uh line 14, if you're there, see it.
Okay. It says, "Like other IRR and cash projections for funds five and six, the reference statement was and continues to be supported by, and we went through all of this earlier, the history, property selection, holds and exit strategies, and the current performance of the funds is the basis that's represented here, is that the same basis that Cardone Capital believes supports the 15% targeted IRRa representation here in this May 5th, 2019 post."
Is that the video? This is the post that says 15% targeted IR.
I just don't see the video. So, I don't know what the rest of the video says. So, it's like you're asking me to to to make a claim on something that I haven't I don't see the rest of the disclosure. I'm happy to look at it. I'm happy to see it.
So, you don't know today what the basic
I don't know what it says after that headline right there.
Objection test. Do you know Mr. Cardone what the basis for this post on May 5th, 2019 was?
No. The basis for all projections that we made or projections were targets. To the best of my knowledge, to the best of my experience and with our best effort, we buy great assets in great locations at the right price. Don't overlever them. Take care of them. Manage them. Distribute cash to our investors. hope and pray, cross our fingers, uh, that the real estate gods rain money on our people. So, I'm just doing my best to can't promise this. I can't guarantee it. I just do my best to deliver it. And up to this point, we've done extremely good job at at it.
Mr. Ferdone, I'm going to mark this as exhibit 246. Do you guys even hear this conversation anymore or y'all just check out on it? Have you Are you familiar with this letter?
This is my team, right? your operating agreement. Did you review this letter in preparation for your deposition today?
Yes, I did. Okay. And this is a letter from
Can I just get Can I I just want to get
Let me ask Let me ask my questions. No, but can I can I
a letter? You asked me to look at it. Can I just look at it? Oh, you want to look it? You can look at it. Of course.
I just want to look at it now. Okay. I'm looking at it. Let me know when you're ready. Oh, no. I'm That's what I'm saying. I'm ready.
Okay. On page three of this letter, and this is a letter from uh Cardone Capital on behalf of Fund Five to the SEC, right?
On page Sorry, three of this letter. I'm looking at it.
It says at the top, "We have implemented the following Cardone Capital marketing policy. All media and communications are vetted prior to being dispersed for legend copies. Any mention of any specific fund of Cardone Capital will contain the proper legends. Consistent monitoring and evaluation of all communications are dedicated to a Cardone Capital employee for proper execution of the communication and media policy. Do you see that?
I do. Okay. And topic eight today requested information on what this marketing policy is.
Topic eight. Yes. Where's that? If we look at the deposition notice is more work than work.
Okay. I'm looking at 229. Topic eight. Topic eight. Page five. It asks about the Cardone Capital marketing policy referred to in the September 26, 2018 letter from the company to the SEC, including what the marketing policy is, why the policy was enacted.
What number? We're still on eight. I'm looking at page eight. Yep. We're number eight. Oh, sorry, not page eight. Page five. Topic eight. Okay. The Cardone Capital. Do you see it?
I see it now. Okay. Did you prepare for this topic today?
I am fully prepared. Ready to go. All right. So, uh, in this September 26, and we're now back on the letter to the SEC, do you have that in front of you?
Which one is that again? It's right under your Okay, I see it. I'm with you. It says that all media and communications are vetted prior to being dispersed for legend copy.
Yes. Who is responsible for vetting the social media posts?
The marketing team. Who on the marketing team in September 2018?
I don't recall. I have 230 employees here. 200 in Phoenix and 600 more across the country. So you don't recall the specific individuals who were responsible for vetting the social media post?
No ma'am. Was September 2018 the first time Cardone Capital had implemented a communication and media policy.
I don't know. Maybe I don't think so. We we we always had a policy policies. Tell the public about our deals. Tell the truth. share the risk.
And it says here, all media and communications are vetted prior to being dispersed for legend copies. What were media and communications being vetted for?
Whatever recommendations the were made by the um um by the authorities at the SEC. What recommendations did the SEC make?
Well, I'll tell you what they made. She had to go back to the they said um they made some recommendations to our team about disclosures, the risk, you know, the projections were only projections. It's all it's all on our circular. I can't find the circular right now, but uh that we were an emerging growth company. We have no control, they have no control, no voting rights, that it was my responsibility. There's stuff in there. If I die, it's going to be a risk to the asset that it would significantly impact. If there was an environmental issue, there would be significant impact. The list of risks are so intense and we shared all that. We also told the investors repeatedly and were told to, hey, don't uh don't rely on what Grant says. It says it in the circular. Don't rely on what you heard the spokesman say or Grant Cardone say or team members or um do your own diligence.
I'm going to move to strike as non-responsive everything after they said they made The time is 3:35 p.m. We are back on the record. The time is 3:37 p.m.
Okay, as I was saying, I am going to move to strike everything that followed Mr. Cardone's first sentence. Mr. Cardone, what is a legend?
Some people call me a legend. a legend that you're referring to would be some people suggest suggesting uh reference to the data included. It was important that all test water communications contain proper legends, right?
Yes. Objection beyond the scope of the deposition. Why was that important? Would you have sir?
Second. Yes. It was a report that all Esther Waters communications contain Papa League legends. Objection. What was she answer?
What was my answer? Yes. I forgot what my answer was.
It was a yes. Yeah, sure. Okay. Wire legends at Barton?
Yes. To me to the investor. to the SEC.
Why are they important to the investor? Objective. I don't know. You have to ask the investors.
Why do you believe they're important to the SEC that they be included? You'd have to ask the SEC. You have to wait for the attorney next.
Sorry. It's the first time I've gotten that. Ask the SEC. It makes me fall behind. Yeah, no problem. I don't want that. I got you. One sec. So you don't know why leg
So you don't know why legends are important? I didn't say that.
Well, Mr. Cardon, tell me then. Why are legends important to include? Why are they important to me?
Sure, Mr. Card. I mean, when you're learning when, you know, if you're looking at a map or weather, the legend would tell you blue represents cold weather, red represents dry weather. Like it the legend tells you what you're looking at. Now, why the SEC wanted that there, I you have to ask them. And let me just say this, okay? All this was new to everybody involved. This has never been done in the United States of America, which is a shame that regular everyday people can't like my mom and my sister and my nieces could not invest with me if it were not for this regulation. And these funds were originally designed for my family so that they could invest in these. That's where we initially started, Morgan. My sister, my brother, my nieces, and then other people over time wanted to say, "Hey, I want to get in your deal." And the moment we started to expand, at which point we had to start getting legal advice about how to do this.
I'm going to move to strike the answer as non-responsive. Let's look at exhibit 247, please. Have you seen this letter before, Mr. Cardone?
Yeah, I've seen this. Okay. What are we looking at? Page one is uh is in reference to um post online and our response.
Okay. So this is a letter from Cardone Capital on behalf of fund five to the SEC, right?
Yes. And on the first page here, the letter, let's see, the letter says that the company has adopted and it's subsection A here says to ensure ongoing and future compliance.
We're on just page one. Okay. Subsection A. Okay. says to ensure ongoing and future compliance y the company has adopted a social media and solicitation policy.
Yes. Copy of such policy is here to attached as attachment one to this letter. Let's take a look at attachment one which is just on the next page page three.
Okay. This document is titled action plan and written social media compliance manual. Right.
Yes. Did you personally review this manual?
Yes. And it says here, right at the top, all social media posts on all social media platforms, videos, websites, live shows, replays of shows have to be compliant with the SEC. What does it mean to be compliant with the SEC? Mr. Cardone.
Objection. No foundation. We have we have a marketing department back there. It's a bunch of human beings that require direction and guidance. We're putting protocol in. We're being directed by the our legal and the SEC how this should be laid out. Again, this is the first time this has been done at scale. And we're putting policy in. This is we're we put policy in every day at this company. And it says here and now I'm trying to
in this second paragraph here it says as such this social media policy is a living document and will be reviewed on an ongoing basis with an emphasis on preventing false and misleading communications. Right.
That's right. And it notes uh in the next sentence that the consequences of non-compliance are grave.
That's right. We could lose the qualification to offer regulation a funds. Correct.
That's right. So, it was incredibly important that Cardone Capital employees comply with this action plan and written social media compliance manual. Right.
That's right. I made it very, very clear. It's a very serious matter. Um, I don't know if you've read the kind of things that can happen to somebody that's false and misleading, but it's very serious. I took it very serious. We put in policies and regulations to make sure none of these people here that work here that maybe have less paying less attention than I am to the seriousness of the situation would uh intentionally or unintentionally um post something that that that did not clear this compliance.
Let's look at 248. Thank you. Mr. Cardone, do you recognize this document?
Same thing I just read. Well, it's got the same title, correct? Uh, actually the first two paragraphs are identical.
Yeah. So, I mean, it's verbatim. If you want to look at them side by side, they're not exactly verbatim. Uh, this document at 248 appears to be an evolution of the manual.
Okay. Right. You can take you can take a look for yourself and see. Take a look. What?
That this appears to be, you know, an evolution of this action plan and written social media compliance manual. Looks almost identical to me. I don't know about an evolution. This could
be evolution. We do evolve here. This was a companywide policy, right?
Yes, there's multiple comp multiple companies here. So, I doubt that this crossed over to Cardone Training Technologies or Cardone Ventures, but yes, it says Cardone Capital at the top, right?
That's right. I just want to make it clear, it might not have breached the rest of the companies. This is what Cardone Capital believed was required to comply with SEC rules, right?
No, this is us trying to attempting to educate our staff on what exactly it is that the SEC requires while we're marketing. So, we're all 2018, we're just starting to do crowdfunding at scale. No one has ever done this. The SEC hasn't done it. The authorities haven't done it. Prior to this, you could not raise money like this. You could not let regular everyday people invest in any kind of assets much less this. So we're all kind of getting our feet underneath this putting policies in place.
If we turn to the last page of this page 11 and there's a signature page. It says, you know, I've read this manual and I agree to comply and participate in ongoing compliance training. Right.
Yes, I see that. And there's a space for signature. Correct.
I see that all Cardone Capital employees had to sign this document or just marketing employees.
Well, the only people that were allowed to do any marketing on this subject were uh Grant Cardone, Ryan Seo, and marketing. And I believe that we would end up removing that from others so that it was just me and Ryan later. T S E K O T S C E K O
I'm telling you this is an RB part. That might have been extended to Andre. He probably did some marketing. I don't know when Andre came on though. So
a N and D re. So you said the only people that were allowed to do any marketing on this subject were you?
It was originally the marketing department. Grant Cardone, Ryan SEO. You asked me about who was this for? It was for the marketing department.
Okay. It didn't go to accounting. It didn't go to the property. Didn't go to property management. Right. I'm just trying to get clarification on your question, your answer earlier. It said, you said, "Well, the only people that were allowed to do any marketing on this subject were Grant Cardone, Ryan Seco, and is there anyone else?"
Keep going. I just told you all the other people and Andre and you're saying a marketing department. The marketing department.
Who was in the marketing department? Whoever was in the marketing department at that time.
You don't know who was in the marketing department at that time? In 2018, you want me to you expect me to remember the names of everybody that was in the marketing department? That's not real
Mr. Hardone. Mr. Hardone. Okay. If we go back, if you notice though, you will see all the marketing is actually done by me. If we go to uh exhibit 229, the amended 30B6 notice
229. Okay. And it asks for the identity of each employee, executive, department or outside party responsible for. And then it says in section three,
what page? This is on the first uh page four of the document topic six. Okay. And then it says preparing, drafting, or creating the test of water communications identified in section F below. I'm sorry, but I must be on the wrong page.
We're on page four, topic six. Okay. I see that. Was the marketing department involved in preparing, drafting, or creating the test of water communications that were identified in section F?
Well, objection. We um you have our correspondent stating our objection to this to this very topic and um the company's position relative to whether the witness would be prepared to or would come in here and list the name answer exactly the question that you're asking.
If you if you're able to answer that question, we could answer. What is the question? If you recall it,
do you know the identity of the employees who were involved in preparing, drafting or creating the test of water communications? I know some of them who are involved. Grant Cardone, Ryan Ts Ko, 2018. The sourcing and acquisition of fund five and fund six. No, no one other than me. Soliciting investments. That could be I mean there's a bunch of people up there answering the phone. And I have no idea what their names are. There would be some turnover up there, I'm sure, as there is with any company. The test the water communications, that's a bit um communications with investors. No communications and violence with the SEC. I think you have all the emails from people that communicated with the SEC. Let's go back to exhibit 248, which we were just looking at the action plan and written social media compliance manual.
Okay. And we were looking at the last page, the signature page.
Yes, ma'am. Did you sign this document?
I don't think this was delivered to me. But I would have approved this. Butter.
Okay, it says here on the first page, if we go back to the very beginning, okay, the first part in bold, marketing associates are required to log any repost or new post that is made on behalf of Cardone Capital.
So, there was a log that was kept of Tesla Water Communications. Is that right?
That's right. Where was that log kept?
I don't know. Does Cardone
somewhere on a Google Drive? I'm sure. Goo Google spreadsheet. It's 2018. So
probably in the cloud if you understand, you know, I don't completely understand what the cloud is, but and it says a log is kept of each and every post on all social media platforms.
Yeah. Be sure to either date the that be sure to enter the date of each post and include a screenshot or description of each post. Print a hard copy and put it in a binder for the fund it advertises. Do you see that?
Yes. So, there was also a hard copy binder of these posts, right?
That's what this says. And there's a hard copy binder. Um, well, let me Does Cardone Capital still have that binder of the post?
Sure, we do. Yeah. Would you be able to produce that if we have it? Yeah, sure. Nothing to hide here. And how about the log that was maintained for these posts if it's on Google?
Wherever it is, it is on the next page. in the middle of the page in all caps. It's on, you know, once it's on the internet, it's kind of hard to get it off.
It says each and every post must always must always have the most current legend under the compliance unless the compliance team tells you otherwise. Right.
When did Cardone Capital start adding legends to its posts for fun five? objective on sto
I'm not sure actually it is when said here eight years later on the next page 570716 at the bottom the manual discusses is email marketing campaigns, right?
Yes, ma'am. What is email marketing?
Where is it on here? The bottom of page three. Three of 11. Mhm. Email marketing. All post contain date and number. Then the post. Oh, I'm sorry. I'm just reading stuff. It's right here. I shouldn't even done that because I'm just reading to myself.
Okay. Yeah, but you can read read those paragraphs. Okay. Okay. Email marketing. What is it?
The manual here says that the copy Should I answer that? Oh, yes. What is email marketing?
Great question. So, we have 7 million people on an email list. Maybe 8 million people. those 8 million people we send out what would be a lot of emails Margaret what would be a big number because whatever the number you think it is it's bigger we send out 400 last year 411 million emails to 8.3 million people now the Cardone Capital email list is not quite that big I don't know 75,000 people email marketing is sending an email about an an upcoming course, conference, workshop or training or an investment. There are emails that are produced that say things like Grant Cardone parenthesis invest card.com. There are emails that have been produced and they say they're from Grant Cardone, but they come from the email invest card.com.
Okay. Are those examples of email marketing?
I I'd have to see them. Okay. She can look at one later. Sure. The manual here says that uh the copy of the email marketing campaign must be sent to uh corporate council and compliance to ensure compliance before getting approved by Sherry and or Grant. Correct.
Yes. So either you or that's Sher Hamilton.
Yes. Has to approve all email marketing campaigns. Right.
At that time yes that has changed. Who is Sher Hamilton?
She's COO of Cordon Training Technologies. And it talks here about the copy being drafted by the copyright team andor the email marketing specialist.
Do you know who the email marketing specialist was? Uhuh.
Okay. Now the manual continues uh and it says on the next page, page four, let's talk a little bit about what we are advertising right at the top. Uh, I think it'll make it easier to comply with all of these crazy sounding rules if you understand what we are advertising and why the rules may seem so weird but are actually super important. But the number one reason we have all these rules is to protect the public from these especially what is called the nonacredited investor from misleading advertising that they don't understand. Right.
That's right. That's right. It was important that Cardone Capital employees not mislead investors, right?
No, it's important that these people know exactly what they're investing in. So, the right people out of 20 million people, the right people invest in these assets. It's very important. It was very important to me. I mean, at the end of the day, it's only it only mattered what was important to me. this was this would have been put in place regardless of what was required of us. So we also had to assist and wanted to assist with the SEC and these new rules regulations which have all changed just since we started doing this. For instance, the the nonacredited accredited rules have been completely changed here in the last just this year. So, in a nutshell, it says we buy really big, expensive communities with lots of units. We're making it, we're dumbing it down. So, my team that's growing, these are not salespeople. These are not negotiators. These are not um what's it called? Series 65. These are not lawyers, smart people like yourself, Morgan. These are people that are coming in that are interested in real estate. follow my brand and they're answering questions. So, we're basically dumbing everything down. Guys, what you need to tell people is we're buying big expensive communities. Leave the heavy lifting to Grant
the B. Let's go to the next page. It says toward the bottom here, accredited investors are considered sophisticated investors and are less likely to be hurt from a bad investment because they have a certain amount of money, right?
That's what this says. Yes. So nonacredited investors
completely disagree with but
nonacredited investors are more likely to be hurt from a bad investment than accredited investors. Is that right?
Objective for mistakes assessment. Yes. This is a general concept produced years ago by Congress that I completely disagree with, by the way. But to be in compliance with the other institutions involved, I went along to get along. I do not believe accredited investors are more sophisticated any more than I believe a nonacredited is not sophisticated. My question was not whether nonacredited investors are sophisticated or not.
But that's that's exactly what you just read. My question was whether nonacredited investors are more likely to be hurt from a bad investment than accredited investors.
But it's not true. That's not true either. Investors objection. Public object. Uh whatever I said. I know I think of just objective. Yeah, I know accredited investors that could be hurt more by a bad investment than nonacredit. It has nothing to do the the ruling shouldn't even be there. It's a racist thing. The the the the accredited nonacredited status is discriminatory. What we were what we're doing at Cardone Capital is to remove the not if it was up to me, I'd remove the nonacredited and the accredited. While I'm doing this, I'm complying with the law and I'm also having to educate a bunch of people on floor 10 on exactly how to deliver the message without uh violating any of these new laws that are being passed. When Cardone Capital communicated projected returns to sophisticated or accredited investors, did the substance of those projections ever differ from the projections communicated to nonacredited investors?
Again, the it is wrong to suggest that the accredited is more sophisticated. There's zero validation anywhere in the world to suggest that. Let's go to page 21 of this. Um, and can we look at number four here?
Can look at every We can look at all of them. Okay. It says, make sure to do make sure your words are not misleading.
Yes. And it says, uh, as an example, I got rich in a year from investing in multifamily real estate. Make sure what you are writing isn't misleading to an investor or customer. Providing a disclaimer to explain that your subject line isn't true does not make it okay, right?
Yes. So, it's not enough to add a disclaimer. Correct.
Well, that's not true. Speaks for itself. What? This document speaks for itself. That was my
We did not deliver number four to these people without telling them, "Make sure you can substantiate. Make sure that advertisings aren't deceptive." We're not. Claims have to measure up to truth and accuracy. They did and we are not misleading. In addition to that, we will have a disclosure on each one of these for every investor to make sure they understand that no matter what I said, I think this thing can do. uh they should do their own due diligence. There could be loss. There could be losses because of who 15 pages of risk assorted. There should absolutely be a disclaimer. And that's what we're telling our people. Do not send unsolicited emails to Canada. I don't know why that is, but
I'm going to move to strike that as nonresponsive. My question is simply as it says here, it's not enough to rely on a disclaimer to make sure that your post is not misleading, right?
We would never have we would never have told our people that on one page by itself without the rest of the thing without the rest of the directions here. You're you're you're mis you're trying to be misleading to me right now.
Mr. Cardone, I'm going to move to strike that as nonresponsive. No, you're but you know that's true. Earlier when we were talking about one of your posts, you said that it had a disclaimer and that a disclaimer was sufficient. Is it your position that having a disclaimer on the post is enough to cure any misleading representation in a post
objective form? I think that misstates his testimony. It does. It does misstate my testimony. We use a disclaimer. We use the truth. First of all, I project out what I think it can do. I use the words project, target, I use a disclaimer. Then they have to go and get an accountant to sign off that they can make this investment in some cases. Then they have to read the full disclosure, then a circling offering. They have to sign all this. They have to agree that they signed it all. Then they have to talk to one of my people and still get in on time. So it's not one thing, Morgan. this many things.
Can we go off the record for media change? Okay. The sentence mean three. We're going off the record. The time is 4:09