Investment fraud is now the single largest category of consumer fraud in the United States.
Not romance scams or tech support. Investment.
How did this happen? We’ve been talking about a contributing factor to this - investment clubs - for days, inspired by questions I’m asking about K-1s crossing my desk. The math is off. And so I started to dig.
Last week I told you what happened when the internet turned the club into a media business.
This week is Part Three, which I hope helps you carefully consider where and how you learn to invest.
Because the investment-club-turned-media model doesn't stop at selling subscriptions.
Eventually it asks for capital.
Here's what I mean…
The newsletter becomes a course. The course becomes a mastermind. The mastermind becomes a "GP pathway." The GP pathway becomes a private placement. And somewhere along that funnel, the person who started out teaching you about money is now raising money from you.
Or, raising money for someone else and getting an affiliate cut.
That's the line. And once it gets crossed, "the math don't math" stops being a tax problem. It starts being a wealth problem.
Let me show you what's coming across my desk and across the federal regulators' desks right now.
The Numbers
- Americans reported losing $15.9 billion to fraud in 2025, and nearly half of it was tied to investment scams (FTC, April 2026)
- The FBI logged $20.9 billion in cybercrime losses in 2025, with $8.6 billion of that from investment fraud alone - Of the money lost to scams that started on social media in 2025, $1.1 billion came from investment scams that began with an ad, a post, or a group chat invitation
- Social media scam losses are up eight times what they were in 2020
- The FBI estimates that 77% of victims didn't realize they were being scammed until law enforcement contacted them
And these numbers are probably higher. The underreporting rate is estimated at over 80% because of embarrassment.
That last number is. Holy. Holy. Guacamole.
If 80 cents of every dollar lost never gets reported, the real number isn't $20 billion. It's something much, much bigger.
The SEC keeps a running list of affinity fraud schemes that target communities of trust, faith, profession, or shared identity. A $300M Ponzi targeting Latino communities. A $650M crypto fraud charged in 2024. The list keeps growing.
The common thread isn't the asset class… it’s a social structure.
Listen - there is a six-step pattern and I want you to be aware of it.
Whether the wrapper is a Discord channel, a real estate mastermind, a high-earner private community, or a tax-strategy roundtable, the playbook is almost always the same:
- A free or low-cost top-of-funnel. A celebrity-stacked event, a webinar, a forwarded invite from someone you trust.
- A soft entry purchase. A $97 ticket. A $1,400 weekend. A "free" group chat. The point isn't the revenue. It's qualification.
- A high-pressure upsell. A $15,000 to $40,000 mentorship, mastermind, or "GP pathway." Buyers are routinely told to put it on a credit card or pull from retirement.
- Captive professional services. The group brings in its own CPA, attorney, or wealth advisor, framed as "vetted." This is the step that quietly removes the independent oversight that would normally catch problems.
- Deal flow as the real product. Members get funneled into private placements (usually Reg D 506 offerings) sponsored or promoted by the group's leaders, who collect commissions on the capital they raise from you.
- Communication failure. When the deals struggle, sponsors stop returning emails. K-1s show up months late with surprise numbers. Refund requests get slow-walked.
That sixth step is where I come in. I'm the one reading the K-1.
And Here's What's Making It Worse Right Now
The macro environment is brutal, I know, and it’s no one’s fault. Sort of.
Multifamily real estate - the favorite asset class for these groups - is in real distress. Properties bought in 2020-2022 on floating-rate or short-term bridge debt are hitting maturity at double or triple the original interest rate. Insurance, taxes, and operating costs have surged.
Even well-intentioned, honest sponsors are missing projections.
That being said…the bad-faith sponsors are using the macro story to explain away losses that were actually structural from day one.
And here's something special: the SEC reported that Reg D filings hit 56,721 in 2024 alone. The SEC does not vet them. The companies are not required to file financial reports. FINRA itself has warned that "investors may have problems finding out how the company is doing".
So when someone tells you a deal is "SEC-registered" or "fully compliant," that doesn't mean what most people think it means.
It means a form was filed.
That's it.
➡️ The Checklist
Before you join an investment club, write a check, or sign a subscription agreement, walk through every single one of these.
If you can't get a clear answer to a question, treat the missing answer as the answer.
Questions About the Group Itself
- Who legally owns the entity running the club? Look up the LLC. Run the principals through SEC EDGAR, FINRA BrokerCheck, and Investor.gov.
- Have the principals been sued before? Check federal court records (PACER, CourtListener) and state dockets.
- Is there active litigation between the founders themselves? Internal lawsuits between co-founders are one of the most reliable predictors of investor harm.
- What does the BBB profile show? Pattern of complaints, refund denials, response time?
- What do former members say outside the group's own testimonials? Reddit, BiggerPockets, Trustpilot, long-form YouTube interviews. Reddit is an especially GOOD resource. Figure it out. Get cozy with it.
Questions About the Money You're Being Asked to Pay
- Is there a real refund policy in writing? Watch out for "100% money-back guarantees" that quietly require impossible-to-meet prerequisites.
- Are you being pressured to put the membership fee on a high-limit credit card or pull from a 401(k), IRA, or HELOC? This is a near-universal red flag. No legitimate education program needs you to liquidate retirement savings to attend.
- Is the upsell structure clearly disclosed up front, or only revealed after you've committed emotionally?
- Does the contract include non-disparagement, gag, or arbitration clauses that limit your right to speak publicly or join a class action?
….and about the Investments They Recommend
- Is the offering registered, or is it a Reg D 506(b) or 506(c) private placement?
- Did you receive a Private Placement Memorandum, and have you (or an independent attorney) read every page?
- Is the same underlying asset being sold through multiple offerings? Ask explicitly: "Is this property held in any other fund or sister entity you sponsor?"
- What is your actual ownership percentage of the underlying asset, end-to-end through every layer? Not the percentage of "the fund" - the percentage of the building.
- Who signs on the loan, and what's the debt structure? Floating-rate? Bridge? When does it mature?
- Are sponsors taking acquisition fees above industry norm (typically 1-3%)? Some groups charge double.
- What's the sponsor's track record on full-cycle deals — not just acquisitions? Anyone can buy a property. The question is whether they've successfully exited one.
About the Professionals They Bring In…
- Is the CPA, attorney, or financial advisor independent of the group? If they earn a referral fee, kickback, or commission, they are not your advocate. They are part of the sales structure.
- Will the group accept your existing independent CPA or attorney reviewing the deal before you commit? A "no" is the answer.
- Are tax strategies being sold as part of the package? Many of these collapse the moment the IRS looks at them.
Ask About the Communication Pattern
- How often will you receive financial reporting? Quarterly distributions and audited annual statements should be the floor.
- What happens if you ask for the operating agreement, the loan documents, or a P&L today, before you invest? Try it. The response time and tone are diagnostic.
- Has the group's principal place of business moved jurisdictions recently? Sudden moves from Florida to Nevada, Wyoming to Delaware, etc., often precede legal trouble.
Questions…to ask YOURSELF
- Could you afford to lose 100% of what you're putting in? That is the actual test. Not "is it likely to fail" - "if it does, am I still okay?"
- Is anyone pressuring you to decide today, this weekend, or before "the price goes up"? Urgency is a sales tool, not an investment characteristic.
- Have you slept on it for at least 72 hours, away from the group? Cult-of-personality dynamics are real, and they fade with distance.
The California DFPI also has a plain-English private placement warning that is worth reading before you invest.
If You're Already In and Worried
Document everything now. Contracts. Payment receipts. Emails. Group chat screenshots. Recordings of calls. Marketing materials. Settlement offers.
Do not delete anything. Do not sign a new settlement or non-disparagement agreement before talking to an attorney who is independent of the group.
You can file a complaint with the FBI. Through Operation Level Up, the FBI has prevented an estimated $400 million in additional losses by intervening early.
You can submit a tip to the SEC by going to their website.
Your state attorney general's consumer protection division also accepts complaints, and many states (New York and California, in particular) have securities divisions that move faster than the federal regulators.
Friends. Here’s The Bottom Line
The group structure isn't the problem. People have built real wealth alongside trusted communities for as long as commerce has existed.
The problem is the modern version. Where the group is the sales funnel. Where the trusted experts are paid by the group. Where the deals are sourced by the group. And where the only person in the room without independent representation is you.
Remember the original formula from Part 1: education + access + small-dollar participation + community + social proof.
The good modern versions still honor that formula.
The dangerous ones just borrow its language.
The checklist above isn't paranoid. It's just what you'd do if a stranger walked up to you on the street and asked for $40,000. The fact that the request comes wrapped in friendship, expertise, and a celebrity stage doesn't change the question.
It just makes the question harder to ask.
Ask it anyway.
Read related content!
