Tax-Business Promoters Accused of $64 Million Ponzi-Style Scheme; Salesman Allegedly Kept Selling After Warnings

Published Oct. 12, 2026. Case statuses are current as of that date, based on SEC records.

Investors were sold promissory notes and stakes in limited liability companies that were supposed to fund profit-making businesses. The Securities and Exchange Commission says much of the money instead covered the costs of a separate tax-preparation business, paid for luxury lifestyles and made Ponzi-style payments to earlier investors.

On Sept. 11, 2026, the SEC filed fraud charges in the U.S. District Court for the Eastern District of Tennessee against Paul Thomas Croft, Jonathan David Frost and Matthew William Dira [1]. The case is SEC v. Paul Thomas Croft et al., No. 1:26-cv-00257.

Status at a glance: Frost pleaded guilty to criminal fraud and money-laundering charges in a parallel federal case and has agreed to a settlement of the SEC case, subject to court approval. Croft and Dira have not been found liable in the SEC case, and the SEC release reports no settlement with them [1].

What the SEC alleges

According to the complaint, from about January 2021 to September 2023, Croft and Frost, through entities including Croft & Frost, PLLC and others, offered and sold promissory notes and LLC membership interests, raising about $64 million from more than 230 investors [1].

The SEC alleges that rather than using the money for the profit-making activities described to investors, Croft and Frost:

• Misappropriated investor funds to cover expenses of a separate tax-preparation business;
• Financed their own luxury lifestyles; and
• Made Ponzi-style payments to existing investors using money from newer ones.

Dira, the SEC says, worked as a securities salesperson and administrator. The complaint alleges he kept soliciting and selling millions of dollars of promissory notes, earning more than $500,000 in salary and commissions, even after receiving communications warning that Croft and Frost were likely running a Ponzi scheme [1].

The charges

Croft and Frost are charged with violating the antifraud provisions, Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. Dira is charged under Section 17(a)(2) of the Securities Act and with acting as an unregistered broker under Section 15(a)(1) of the Exchange Act [1].

Frost's settlement and criminal plea

Frost consented, without a trial, to a bifurcated judgment, subject to court approval. It would permanently bar him from violating the charged provisions and from participating in the issuance, purchase, offer or sale of any security except for his own personal accounts, and would require disgorgement, prejudgment interest and a civil penalty in amounts the court will set later on the SEC's motion [1].

Separately, the SEC says Frost previously pleaded guilty to criminal fraud and money-laundering charges in United States v. Jonathan D. Frost, No. 1:26-cr-00004, in the Eastern District of Tennessee. The SEC release does not give a sentencing date, and we did not independently review that docket.

How an SEC civil case works

The Securities and Exchange Commission is a civil regulator. It cannot send anyone to prison. When it sues, it asks a federal judge for remedies such as an injunction (a court order not to break the securities laws again), disgorgement (giving up money obtained through the alleged violations), prejudgment interest, civil penalties, and sometimes bars from serving as a company officer or director or from working in the securities industry. Criminal charges, when they exist, are brought separately by the Justice Department.

A complaint is the SEC's side of the story. Until a court rules, or a defendant settles, the claims in it are allegations. Many defendants settle "without admitting or denying" the allegations, which means they accept a judgment and its penalties without conceding that the SEC's account is accurate. A "consent" that is "subject to court approval" is not final until a judge signs it. A "bifurcated" settlement resolves liability and the injunction now while leaving the dollar amounts for the judge to decide later. A default judgment is entered when a defendant does not respond to the lawsuit; it is a ruling against that defendant, but it is not a finding after a trial.

Red flags in promissory-note offerings

• Notes promising steady, fixed returns from a business you can't inspect.
• A seller paid by commission who is not registered as a broker.
• Money from one venture flowing into another business owned by the same promoters.
• "Interest" payments that continue only as long as new investors keep buying.

Before you hand anyone money for an investment

• Check the seller. Search the person and firm on Investor.gov and FINRA BrokerCheck. People who sell securities for commissions generally must be registered.
• Check the offering. Search the company name in the SEC's EDGAR database and your state securities regulator's enforcement actions.
• Treat "guaranteed" returns as a warning. Real investments carry risk. Promises of fixed monthly profits, or a guarantee that you can't lose your principal, are hallmarks of Ponzi-style schemes.
• Watch for pressure and secrecy. Deadlines, "sold out" claims, or requests to wire money to a personal or unfamiliar account deserve a pause.
• Ask how you get your money out. Excuses, delays, or new conditions when you try to withdraw are a serious red flag.

If you think you were affected

1. Save your records: account statements, wire confirmations, emails, texts and marketing materials.
2. Report it to the SEC at sec.gov/tcr and to your state securities regulator. If money was stolen, you can also report to the FBI at ic3.gov.
3. Follow the court case. If a receiver or fair fund is created, notices about claims are usually posted on the court docket or a receiver's website. The SEC does not charge fees to return money.
4. Beware of "recovery" offers. Scammers often target people who already lost money, promising to get it back for an upfront fee.

Case status (as of Oct. 12, 2026)

Defendant	Court	Status	Source
Paul Thomas Croft	U.S. District Court, E.D. Tenn. (No. 1:26-cv-00257)	SEC civil complaint filed Sept. 11, 2026; allegations only; no settlement reported	[1]
Jonathan David Frost	Same	Consented to bifurcated judgment (subject to court approval); pleaded guilty in parallel criminal case No. 1:26-cr-00004 (E.D. Tenn.)	[1]
Matthew William Dira	Same	SEC civil complaint filed Sept. 11, 2026; allegations only; no settlement reported	[1]

Statuses can change. An SEC complaint contains allegations, not findings, unless a court has ruled.

Sources

1. U.S. Securities and Exchange Commission, Litigation Release No. 26638, "SEC Charges Two Promoters and Salesperson in Alleged $64 Million Offering Fraud," Sept. 14, 2026. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26638
2. SEC complaint, SEC v. Croft et al. https://www.sec.gov/files/litigation/complaints/2026/comp26638.pdf

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