He obviously lied to get business. That WAS apparently illegal. We don't know if he just took money and decided to keep it, or if as soon as he opened his business with all the lies, a whole bunch of desperate people sent him checks before he had the investors lined up to help him, and after a month or few of "where's my money/help?" he goes sued before he even had a chance to do anything.
You know what you do if someone just sends you a check and you don't think you can provide services? You don't cash the check.
How do you know the service of actively looking for investors was not being performed?