PIERRE, S.D. — The South Dakota Public Utilities Commission has set a hearing for April 7, 2021, to determine whether Fearless Grain Marketing owner Jeremey Frost bought grain without a license, to consider penalizing Fearless Grain Marketing for the alleged purchases, and to decide whether to block Frost's license application.

Separately, Frost is also involved in a civil lawsuit filed by Indigo Ag of Memphis and Boston.

SDPUC lawyers, in a March 31, 2021, complaint, allege Frost is in violation of Class 1 misdemeanors for each of many unlicensed grain purchases and urge a maximum penalty of $20,000. It isn’t clear how many farmers or dollars are involved. Further, the staff urges the Commission to rule that the violations should cause the agency to deny a grain buyer license for Frost and “to any entity with Frost serving as an owner, manager or chief executive officer, or any other managerial or advisory position of a grain buyer,” the complaint said.

The agency lawyers asked the SDPUC to hold a hearing in less than 10 days. An ad hoc hearing has been set April 7, 2021, at 2 p.m., in Pierre, at the Room 413 of the Capitol Building.

Further, the agency staff is requesting the SDPUC to apply to circuit courts for an injunction against both Fearless Grain Marketing, of Onida, S.D., and Frost.

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To listen to the meeting, go to www.purc.sd.gov, and click on the LIVE link on the home page. The hearings are archived on the PUC website under the Commission Actions tab. Click on “commission Meeting Archives.”

Through an attorney, Harris L. Kay, of Chicago, of Chicago, Frost declined comment, saying he would "respond in due course.” Agweek was unable to reach his local counsel, Robert T. Konrad, of Pierre.

‘Bought grain’

According to the SDPUC staff complaint, “Fearless” and Frost, the company’s sole owner and registered agent, bought grain even though neither was a licensed grain buyer.

In the complaint, signed by SDPUC staff attorney Amanda M. Reiss, the staff is asking the commission for an injunction to stop Fearless and Frost from “continuing to purchase grain” in the state, and to issue a fine.

The violations “constitutes good cause” to deny Frost’s Dec. 28, 2020, application for a grain buyer’s license, Reiss wrote.

Here is a timeline, based on the PUC complaint:

  • 2018 — The agency had provided Frost with information about licensing requirements.

  • Dec. 28, 2020 — Fearless applied for a Class B grain buyer’s license in the name of “Fearless Grain Marketing, Storage and Arbitrage, LLC.” (Fearless MSA). The application didn’t include bond or license fee, Kenefick-Aschoff said. A Class B buyer can purchase less than $5 million and cannot offer voluntary credit sales contracts, such as deferred or price-later contracts.

  • Jan. 29, 2021 — Fearless MSA notified the SDPUC staff that he was “unable to obtain a bond,” Kenefick-Aschoff said.

  • Feb. 18, 2021 — SDPUC staff informed Frost that Fearless FSA would not qualify for the license because it lacked the required bond, and cautioned him “not to purchase grain without a valid license.”

  • March 10, 2021 — The SDPUC staff “became aware that Fearless may again be purchasing grain without a license.”

  • March 17, 2021 — SDPUC staff starts looking at the company’s books and learned the company had made “more than 23 purchases of grain without a license going back to at least July 8, 2020.” The investigation showed that Fearless/Frost had not provided payment for “a number of these purchases” within 30 days, which is required by law. That day staff indicated SDPUC was willing to “resolve the matter, with the expectation, Fearless and Frost cease grain buying activities.”

  • March 30, 2021 — SDPUC staff further learned that Fearless/Frost had not disclosed some purchase contracts in their March 17, 2021, inspection.

“Considering Frost and Fearless’ seemingly blatant disregard for state law and Staff’s warnings and the financial condition observed in the inspection, Staff believes Fearless and Frost’s conduct put producers in undue risk of financial harm and therefore the maximum penalty should be imposed,” the complaint said.

Fearless Grain Marketing’s location is 1003 8th St., Onida, S.D. Besides Jeremey Frost, the articles of incorporation on May 3, 2017, listed owners of the LLC to include , Sherry Frost, Signs on a Dime LLC, Sebastian Frost, and two other younger children, all at the same address. On Aug. 12, 2020, the company corrected its articles of incorporation, saying they’d made a mistake in thinking the section was “of testamentary effect.”

“At no time was Fearless Grain Marketing LLC owned by any other person than Jeremy (sic. Jeremey) Frost,” the correction said.

Other issues

Separately, Oct. 7, 2020, the South Dakota Division of Insurance reached a “consent order” against Frost for selling shares in a business without a state license. Frost neither admitted nor denied violating the law but with the agreement waived the right to contest the allegations and paid a $1,000 fine.

According to the insurance authorities, Frost was registered by the National Futures Association, as designated by the Commodity Futures Trading Commission, but didn’t have a broker license in the state. State insurance officials said Frost was a shareholder of a “closely held business” and had acted as broker-dealer in February 2020, “regarding the purchase and resale of thousands of shares of the closely held business” which were purchased by Frost and then “immediately resold” to other persons.

Also separately, Jan. 25, 2021, Indigo Ag Inc. sued Fearless and Frost for grain contract violations, potentially exceeding $8 million. It isn’t clear how many farmers or dollars are involved.

Frost said he’d filed a whistleblower complaint against Indigo Ag with the Commodity Futures Trading Commission in December 2020, and requested arbitration with the National Grain and Feed Association.

Indigo Ag is an agricultural technology company incorporated in Delaware, with principal offices in Boston and Memphis. Indigo originated initially as a developer market of microbial technologies for treating crop seeds to improve yield and quality. The company also deals in carbon credits under the Indigo Carbon entity, and now grain marketing.

Indigo Ag said Fearless entered agreements in May 2019, and then again in 2020, indicating bushels Fearless would provide for Indigo Ag.

In a 40-page lawsuit, in federal court in Memphis, Indigo alleges a breach of contract, stating that FGM entered into “valid binding” grain marketing contracts, improperly binding growers to sell millions of dollars of grain, purportedly on behalf of Indigo to unnamed buyers.

Frost denied any wrongdoing. He and his lawyer in that case, Kay, on March 9, 2021, asked the court to dismiss the suit and put it into arbitration by the National Grain and Feed Association.

SDPUC officials told Agweek they are aware of and monitoring the Indigo Ag lawsuit, but declined comment on complaints or investigations.