The Securities and Trade Fee alleged in a grievance filed in federal courtroom in Los Angeles Tuesday that Stuart Frost and Frost Administration Firm, an funding advisor to 5 non-public enterprise capital funds, defrauded the funds and their traders of over $14 million by charging undisclosed and extreme incubator charges to start-up firms by which the funds invested. The SEC claims they violated their fiduciary duties.
From 2012 to 2016, Frost allegedly raised almost $63 million for the funds, largely from excessive web price people and trusts. The funds had been invested in a collection of start-up firms utilizing the so-called “Frost incubator mannequin,” whereby a Frost-owned firm, Frost Knowledge Capital purportedly supplied operational and different help to assist the businesses develop, with the endgame being a sale to a different firm, in change for charges paid to it by the start-ups.
The SEC stated that in actuality, the charges had been absconded to pay for Frost Knowledge Capital’s overhead and to foot the invoice for Frost’s lavish life-style. When Frost wanted additional cash, he would allegedly create new start-ups, fund them with investor cash, and extract extra incubator charges.
Frost solicited traders through the Web and at in-person and group shows, the SEC claims. He touted a no-fee, no-carry alternative to put money into “huge knowledge analytics,” with exits projected from two to 5 years for every start-up through acquisition by a “main participant” within the pc trade.
Frost allegedly informed traders that he would give you concepts or determine the wants of huge knowledge firms and go them by way of Frost Knowledge Capital, which might write up a marketing strategy and go it on to a portfolio firm, which might then develop software program that will be produced by the businesses.
In actuality, the SEC stated, Frost was charging the businesses tens of millions in extreme and undisclosed charges to help his lavish life-style, which included a private chef and housekeeper, an archery vary, seashore membership membership, a ship and luxurious automobiles.
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