The founder of a Newnan, Georgia-based lender that marketed faith-based investments to conservative audiences was charged with felony wire fraud on Thursday, escalating a civil fraud case into a criminal prosecution nearly a year after regulators shuttered what they described as a $140 million Ponzi scheme, The Atlanta Journal-Constitution reported.
Brant Frost IV appeared before Chief Magistrate Judge Justin Anand and pleaded not guilty to a single count of wire fraud, which carries a maximum sentence of 20 years. Frost waived indictment and was charged under a criminal information, a procedure typically used when a defendant intends to cooperate with prosecutors, the newspaper said. Prosecutors said the government and defense are working to arrange a hearing for a change of plea in the near future.
Frost’s firm, First Liberty Building & Loan, closed suddenly in late June of last year. Days later, the U.S. Securities and Exchange Commission sued the company, alleging it operated a Ponzi scheme by using new investor funds to pay earlier investors. A court-appointed receiver has since been working to recover money for victims, according to the report.
First Liberty was not a bank and did not hold FDIC-insured deposits. Instead, it made loans and sold interests in those loans to investors under the name “First Liberty Notes,” promising annual returns of 8 percent to 13 percent, depending on the amount invested, with a minimum investment of $25,000. The firm’s now-defunct website described company leaders as “authentic followers of Christ” and marketed what it called “creative financing solutions” for businesses shut out by traditional banks.
The company aggressively marketed its offerings through conservative media, appealing to Republican-leaning investors through faith-based messaging and positioning itself as part of the conservative “patriot economy,” AJC said.
The scheme impacted the top ranks of the Republican Party, in part because First Liberty advertised on shows hosted by popular conservatives, including Erick Erickson, Hugh Hewitt, and the late Charlie Kirk, CBS News reported. Among First Liberty’s victims was former Georgia GOP Chairman David Shafer, Alabama state Auditor Andrew Sorrell, and a political action committee controlled by the Republican Sorrell.
Federal officials allege that Frost and First Liberty used at least $570,000 of investor money to make political contributions. The Frost family and associated businesses have made more than $1.4 million in total political contributions, much of it in recent years and most flowing to Republican candidates and causes. More than $300,000 in charitable or political contributions have been returned, according to court records cited by AJC.
The criminal charge against Frost IV is not the only legal jeopardy facing those connected to the firm, according to the report.
Georgia Secretary of State Brad Raffensperger has launched a separate investigation, appointing a securities fraud attorney to lead the probe and issuing subpoenas to borrowers and brokers. Raffensperger’s office has fined Frost’s son, Brant Frost V, $500,000 and barred him from selling securities in Georgia, referring his case to a district attorney for prosecution.
Read more at The Atlanta Journal-Constitution