Croft & Frost: Investors worry that hydrogen plant investments pushed by Chattanooga accountant have gone up in smoke

Contributed photo/ Pat Hilton, left, said he invested $200,000 into the hydrogen plant venture run by the Chattanooga accountant Jonathan Frost, right. Like several other of Frosts former clients and investors, he suspects his money may have gone into a Ponzi scheme.
Contributed photo/ Pat Hilton, left, said he invested $200,000 into the hydrogen plant venture run by the Chattanooga accountant Jonathan Frost, right. Like several other of Frosts former clients and investors, he suspects his money may have gone into a Ponzi scheme.

Pat Hilton is a Dallas-based emcee, businessman and social media professional. In 2022, he said, he was talking taxes with Jonathan D. Frost when the Chattanooga accountant made a pitch: If Hilton invested $100,000 in a land deal for Frost's hydrogen plant venture, he would get his money back with a 20% return in six months.

About six months later, Hilton said, he had not received any money or heard of any real estate deal closing when Frost called him again, seeking another $100,000 — with even loftier promises for future earnings.

Hilton was wary. But he remembered that, in a time of struggle, Frost had believed in him, hiring him to run his social media accounts and host his business conferences.

Hilton wired the money.

Now, more than two weeks after Frost's accounting firm Croft & Frost abruptly shuttered after failing all summer to meet payroll, Hilton said he does not know where his $200,000 is and he has stopped hearing from Frost.

Like several other of Frost's former clients and investors, he said he has come to see the contours of a Ponzi scheme.

"I was under the impression that this guy was one of my best friends and had me and my family and my future secured, and I trusted him," Hilton said in a phone interview. "And I'm not the only one."

Meanwhile, Paul T. Croft, Frost's Chicago-based business partner, is trying to calm investor jitters regarding another of his ventures with Frost: Rhino Onward International, the company associated with the hydrogen plant project that Frost had described to Hilton.

The future of this firm is also in doubt. Its CEO, Brian Kawamura, resigned Sept. 4 along with the entire executive team over lack of payment and the company's poor business practices, Kawamura told the Chattanooga Times Free Press by phone.

Stating that he was distraught, Kawamura said he and his fellow executives at the company did not do anything wrong, and he declined to comment further.

Earning potential

In January 2022, two years after joining forces to transcend the accounting business with highly aggressive tax advice and personal brands projecting bold and glamorous lifestyles, Frost and Croft founded Rhino Onward International in Illinois.

They sought, they have said, to get into the lucrative green energy market, where tax incentives abound. In a video posted Sept. 10 to his YouTube channel, Frost (cigar in hand) discussed his and Croft's efforts to raise money for a hydrogen plant that he said had extreme earning potential but entailed significant risk as well.

Frost did not respond to a phone call, email or text seeking his perspective. In text messages to Hilton on Sept. 11, reviewed by the Times Free Press, Frost said the big real estate deal was being held up by an inspection report and that the hydrogen plant was awaiting a feasibility study.

In an email to the Times Free Press on Thursday, Croft said Rhino Onward International is a legitimate and ambitious green energy firm with projects in the works and that his association with the Chattanooga accounting firm that bears his name has been an unfortunate distraction.

(READ MORE: When 1+1 doesn't equal 8: Jonathan Frost and Paul Croft were selling more than accounting at their Chattanooga firm)

It was on the green energy firm's potential that Hilton was pitched. In late 2022, Hilton said, he and Frost were talking tax strategy by phone when Frost encouraged him to invest in the Arizona real estate deal underlying a hydrogen plant proposal.

Hilton said Frost told him he could deduct the $100,000 investment from his income that year, and then when the money plus a 20% return came back his way six months later, he could invest it again — a promise echoed in a contract reviewed by the Times Free Press signed by both men.

ROI Fund I was founded Nov. 28, 2022, according to Tennessee state records and a contract obtained by the Times Free Press.

The fund, the contract said, "was formed to generate a one-time contractual profit from funding a ten million dollar ($10,000,000) equity infusion to satisfy a term sheet relating to startup funding for Rhino Onward International LLC, an Illinois limited liability company."

The contract shows that what Hilton said was a $100,000 investment earned him four shares in this fund.

  photo  Contributed photo / Pat Hilton hosted motivational conferences and built a social media presence for Croft & Frost. He is now worried he has lost $200,000 in an investment pushed by Jonathan D. Frost.

Trust factor

Hilton felt he had good reason to believe in Frost. He met the accountant at a conference organized by Grant Cardone, the famous social media influencer, sales coach and author of books like "If You're Not First, You're Last."

Hilton, who said he'd been sleeping on floors for years and playing music in bars for $100 per night, performed at the event, and he said Frost approached him warmly.

Soon, the accountant contracted Hilton to do his social media and produce his podcast — and eventually to be a master of ceremonies at his own accounting firm's conference in Chattanooga.

Hilton said his performance at NoogaCon 2020 went viral and helped him become a fixture hosting business conferences around the nation. Meanwhile, he said, he was proud to have built up a social media brand for Frost — not just showing everyone how rich he was, but also as a sober, family man of faith.

"I think we showed a lot of the human side of Jonathan, which is the side that I got to know, rather than the 'let's freaking make the money' side that some people saw," Hilton said.

In 2021, at age 38, Hilton said, he earned his first six-figure income — and he said Frost's pitch about the hydrogen plant land deal seemed like a good way to put his money to work.

"He gave me some ethical ways that I could go about this," Hilton said, "and I cleared them through other accountants that agreed that these sound like sound moves, as long as you trust this guy."

Bouncing checks

Frost's name is listed on paperwork for several companies — many with "fund" in their names — in the state of Tennessee. Those include the Croft & Frost Fund I, established Nov. 8, 2022, and the Croft & Frost Fund II, established Feb. 8, 2023.

In the months after soliciting Hilton's first investment, Frost formed ROI Fund II, ROI Fund III and ROI Fund IV. It remains unclear what the purpose of those firms was; Hilton said he was unaware of them.

In some ways, spring 2023 felt normal to Hilton. He got paid thousands to emcee Croft and Frost's Onward Experience business conference in Dallas, which, according to Hilton and promotional materials, featured the former NFL running back Julius Jones as a headline speaker.

But other things seemed off. For a few months, Hilton said, payment for the social media work he did for both Frost and Croft was bouncing. Still, he said, Frost eventually paid him, belatedly, around $28,000 for the work.

Though Hilton didn't know it at the time, in December 2022, amid what Frost told them were cash flow issues, employees at Croft & Frost were paid as independent contractors of Rhino Onward International — an arrangement accountants and employment lawyers have told the Times Free Press seems dubious.

By late spring, Croft & Frost's payroll issues were flaring up again.

Another investment

Around June, Hilton said, he got a call from Frost. The accountant, he said, sought more money.

Hilton said he had not received the promised return — or to his knowledge, any other form of compensation — from his investment in what he'd been led to believe was the planned Arizona real estate purchase.

"I was like, 'Dude, where's the other money?'" Hilton recalled asking Frost. "'You know, 'Why don't we just get that other money back and use that? Right, wasn't that the goal anyway? To roll that money over?'"

Frost, Hilton said, assured him there was nothing to worry about, but Hilton wanted to put off the discussion for another day.

When Frost called again later, Hilton said, the accountant made a hard sell.

"He was like 'Dude, you've got to hop in on this with me,'" Hilton recalled. "'How about this?' He kind of framed it, like, 'I'll make you a part owner of the company if you put in another hundred, and you're going to get this green energy deduction, and this tax credit and this thing and that thing and the other thing, and the residual income, and we're going to build 10 of these hydrogen plants, and the land deal, we're about to secure it. It's going through, this whole thing's going through, man. Like, this is what we've worked so hard for.'"

In retrospect that pitch nags at Hilton the most; repeating what Frost told him makes his blood boil, he said. Frost, Hilton recalled, said he was proud of Hilton — how he had moved into his first house with his family, how his kids were going to a great school.

"'You're doing all the right things, man,'" Hilton said Frost told him. "'This is going to work out. And I've never let you down.'"

Of course he was going to believe Frost, Hilton said.

"Out of anybody that I'm going to trust with my money," Hilton said, "it's going to be the guy that hired me when I had none."

According to a contract dated June 26, 2023, reviewed by the Times Free Press, Frost sold Hilton ten membership shares in Rhino Onward International for $100,000.

The ten shares constituted 0.1% of the company's value, the contract said — indicating a total company valuation of $100 million.

The others

An open records request to the Tennessee Department of Commerce and Insurance and the state's Board of Accountancy yielded the complaints of several of Frost's clients and investors who say they seem to have fallen into a "Ponzi scheme."

Some said they paid the firm Croft & Frost in advance to do their tax returns only to be left in the dark when the firm suddenly closed.

Other tax clients were also investors and described far greater losses.

Two complaints detail how three Miami, Florida, investors fear they collectively lost hundreds of thousands of dollars investing in Frost's Well Fund — several companies registered to Frost in Tennessee have versions of that name — which Frost purportedly said was backed by real estate, the records show.

A Texas man, Jonathan Ireland, had a similar story. In September 2022, he told the state, Frost and his company presented an investment opportunity. Ireland said he invested $50,000 in Frost's Scorpio Fund to aid in the development of a hydrogen plant. Ireland provided a signed contract with the company, which stated he would receive his money back with 25% interest by Nov. 16, 2022.

Ireland said the repayment maturity date passed, however, when Frost and team approached him with the chance to roll the investment for additional interest. Soon after, Ireland invested in ROI Fund I. He said he now believes his money to be gone.

In another complaint, Marcia Baltimore, a real estate broker from North Carolina, said Frost, her accountant, encouraged her to invest $100,000 in Scorpio Fund.

"He said it was a short-term loan (90 days) that would yield a 30% return at maturity and would give me tax credits in the way of energy credits when I filed my taxes for 2022," Baltimore wrote, providing documentation showing the transaction with Scorpio took place Dec. 5, 2022.

In her complaint, Baltimore said Frost's accounting firm shut down, and her $100,000 "seemed to vanish."

According to the U.S. Securities and Exchange Commission, Ponzi schemes often involve an organizer who offers to generate high returns with little no risk — only to not invest the funds at all. The arrangement is defined by a dynamic in which existing investors are paid with funds collected from new ones.

Cory Jarvis, a spokesman for the Securities and Exchange Commission in Atlanta, said Friday that the SEC does not comment on the existence or nonexistence of a possible investigation.

Since the closure of Croft & Frost, investors in holdings associated with the firms' leaders have had at least two meetings to chart a next course of action. One invite for a Sept. 17 Zoom meeting — its topic was "Investors community ROI" — was extended to more than 160 email addresses, a screenshot shows. Hilton said more people have been added to the email list, but in investor discussions no one seemed sure what was going on.

Strategic plan

In a Sept. 22 note to Rhino Onward International investors reviewed by the Times Free Press, Croft said the abrupt Sept. 12 closure of the Croft & Frost accounting firm came to him as a surprise.

Croft has been seen at company-affiliated events, such as the business conference in Dallas in May. But at the request of Frost and Croft & Frost's chief operating officer, Rocky Garza, Croft said he had been away from Rhino Onward International and any related entity for nearly a year — not, he said, for reasons of performance but because of a personal matter.

It is unclear what the matter was and what specific entities Croft was referring to; Croft did not answer the Times Free Press's questions on the matter.

But in September 2022, Croft was arrested for domestic battery, according to Chicago Police Department records. Croft ultimately pleaded guilty to simple battery, his attorney, Melinda Power, said by email, adding that her client received supervision, which is potentially expungeable.

In the letter to investors, Croft said on Sept. 11, 2023, Frost asked him back.

"Of course, now, what I am coming back to has changed in certain ways," Croft wrote. "I do not know what role, if any, JD Frost wishes to play in ROI. I am working diligently on establishing a foundation for ROI and a realistic, strategic plan."

He pledged transparency. And in a statement to the Times Free Press on Thursday, Croft said Rhino Onward International has an ambitious renewable energy project in the making.

(READ MORE: Months before its fall, Chattanooga accounting firm paid employees in unusual manner)

"We are also in continued, ongoing discussions with financiers and partners for the project," he told the paper. "Obviously, the attention regarding my previous involvement in a Chattanooga-based accounting practice which, unfortunately, continued to bear my name on the header after I left, is drawing unwanted attention to an unrelated entity which has different prospects entirely, in a completely unrelated industry."

Volleyball practice

Hilton said he remains in touch with Croft and feels the Chicago-based businessman is working to make investors whole.

But he sees Frost differently. While some investors are urging caution, Hilton feels an urgency to draw his old friend out.

"Allowing him to have the opportunity to slither away is not benefiting us," Hilton said, "because the more time that goes by, the more opportunity he has to forge some kind of alliance with someone and create another Ponzi scheme."

Earlier this month, his frustration with Frost was swelling as he felt he had received no clarity on his investments when the accountant, already once again behind on payments for Hilton's contracting work, said he was hitting pause on social media, text messages show.

Soon after Hilton heard the Croft & Frost accounting firm laid all its employees off, he said he gave Frost a call.

The sound of Frost's child's volleyball practice could be heard in the background, Hilton said, and Frost told him the big deal was still moving forward. Hilton said he told Frost that if Frost didn't return the money, Hilton would come to Chattanooga, find Frost at practice and shove a volleyball where the sun doesn't shine.

"And he was like, 'I, I understand.' That's what he said," Hilton recalled. "He sounded like a disappointed little boy. 'Yeah, I understand.' And I'm like, 'Do you realize what you've done here, buddy?'"

Court records dated Sept. 22 indicate Frost and his wife have begun divorce proceedings. Hilton doubts his old friend, who he said has stopped responding to his texts, ever had malicious intent. He thinks Frost got in over his head and got desperate as he tried to cover his tracks.

"He needs to come out of the sewer," Hilton said.

Contact Andrew Schwartz at [email protected] or 423-757-6431.

Contact Dave Flessner at [email protected] or 423-757-6340.

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