by NEWNAN, Ga. (AP) — In a complaint filed Thursday, federal officials said that a well-known Republican from Georgia was operating a Ponzi scheme that duped 300 investors out of at least $140 million.
According to the U.S. Securities and Exchange Commission’s civil case, Brant Frost IV’s First Liberty Building and Loan misled investors about its high-interest business of lending money to businesses. Rather, it gathered additional funds to reimburse previous investors, according to investigators.
Even when the company was failing, Frost is accused of embezzling over $19 million from investors for himself, his family, and connected businesses. He also allegedly spent $335,000 with a rare coin dealer and $160,000 on jewelry. Additionally, it is reported that Frost rented a vacation house at Kennebunkport, Maine, where the late president George H. W. Bush’s family famously spent summers, for $320,000 over several years.
Frost continued to write checks, according to the SEC, even after the agency started looking into it.
Last month, First Liberty announced it would no longer be creating loans and would no longer be paying principal and interest to investors in those loans. The business claimed that it was not returning emails or calls.
An email requesting comment from First Liberty was not answered, and the company’s Newnan, a suburb southwest of Atlanta, office was empty Thursday night. Earlier, a lawyer who serves as the company’s corporate registered agent claimed to be unaware of anything.
The enterprise attracted investors from political and religious networks, which were shaken by the failure. In addition, it might affect state Republican politics by denying financing to the far-right politicians Frost and his family have supported. According to investigators, Frost made political contributions totaling $570,000 from investor monies.
As of May 30, the company had only $2.67 million in cash, according to the SEC, but authorities are also attempting to recoup funds from Frost and related businesses. With 300 investors contributing $140 million, the average investor contributed close to $500,000.
According to First Liberty, it provided loans to businesses in need of funding while they awaited more traditional loans from the US Small Business Administration. According to a document The Associated Press was able to get, it charged exorbitant interest rates of 18% on certain loans. For the 18% loans, First Liberty promised investors similarly high rates of return of 16%.
The company has been extensively advertising on conservative radio shows in recent months, offering Main Street investors Wall Street returns.
In a statement, Justin C. Jeffries, associate director of enforcement for the SEC’s Atlanta Regional Office, noted that the promise of a high rate of return on an investment is a warning sign that should cause any prospective investor to reconsider, perhaps even three times, before making an investment.
In an attempt to complete an orderly wind-up of the business, the corporation has stated that it is working with federal authorities. According to the SEC, Frost and his businesses consented to the agency’s enforcement activities, with the court to decide on the financial remedies later.
Even though the SEC claims that loans were made to businesses, up to 90% of those businesses have fallen into default. According to the complaint, the business was operating as a Ponzi scheme by 2021, despite Frost taking out larger and larger sums of money.
Georgia’s secretary of state is looking into the company for potential securities law violations, according to office spokesperson Robert Sinners.
According to Sinners, anyone issuing promissory notes is required to be registered with Georgia securities officials, according to a 2023 document that the AP was able to access.
Sinners urged victims to get in touch with the Securities Division of the state.
Regarding whether they are thinking about filing criminal charges, federal prosecutors have refrained from commenting. Investment frauds can occasionally give rise to both a federal criminal action and an SEC civil case.
Since organizing televangelist Pat Robertson’s Republican presidential campaign in Georgia in 1988, Frost has played a significant role in the state’s politics. Brant Frost V, his son, was the second vice-chair of the state Republican Party and is currently the chairman of the Coweta County Republican Party, where the company is headquartered. The Republican chairman of the 3rd Congressional District, which encompasses Coweta County and other regions southwest of Atlanta, is Katie Frost, her daughter.
