A recent SEC settlement is a cautionary tale for advisers vetting potential investments for their funds, highlighting the need for appropriate and thorough investment due diligence. The SEC claimed that a registered investment adviser and its principal invested several million dollars of their funds’ money with an individual who promised a tenfold payout in just 90 days. Although the respondents’ improvident investment did not directly give rise to liability, their alleged misstatements to investors about the amount of due diligence they had conducted, along with the principal’s undisclosed personal investment in the deal, did. This article analyzes the facts and violations alleged by the SEC and the terms of the settlement order. For more on the importance of due diligence, see “The Importance of Exercising Due Diligence When Hiring Auditors and Other Vendors” (Jun. 21, 2018).