ATLANTA (AP) – Following the collapse of an alleged $140 million Ponzi scheme, which implicated prominent Republicans in Georgia and Alabama, many investors are expressing frustration over the recovery of their lost funds. The situation has become increasingly dire for those affected, including 77-year-old Thomas Todd, a retired business owner, who voiced his concerns to Georgia Secretary of State Brad Raffensperger during a recent meeting.
Raffensperger acknowledged that his office is intensifying its anti-fraud measures, even as Republican lawmakers seek to transfer securities regulation responsibilities from his office to the Georgia Department of Banking and Finance. They have criticized Raffensperger's securities division for failing to identify malfeasance at First Liberty Building & Loan prior to its downfall.
Federal investigations revealed that the company defrauded at least 300 investors, totaling over $140 million. Brad Raffensperger, who is running for governor, faces scrutiny over his office's handling of the case, particularly in light of upcoming Republican primaries.
Brant Frost IV, the mastermind behind First Liberty, had a long history in conservative politics. The company claimed to provide high-interest short-term loans to businesses and offered investors annual returns of up to 16%. However, a U.S. Securities and Exchange Commission (SEC) lawsuit alleges that Frost misappropriated $17 million for personal use, including funding for family members and affiliated companies, while also lending millions to borrowers who ultimately defaulted.
Among the notable individuals who lost money are former Georgia GOP Chairman David Shafer and Alabama State Auditor Andrew Sorrell. Many grassroots Republicans also fell victim to the scheme, having been attracted by advertising on conservative media platforms. A federal court has appointed a receiver, Gregory Hays, to recoup funds on behalf of the defrauded investors. Hays is currently reviewing 48,000 financial transactions related to the case.
As of December 31, Hays reported $3.59 million in assets, with ongoing efforts to liquidate seized property. The Frost family has surrendered five luxury vehicles, generating nearly $139,000 at auction, and Hays is in the process of selling the First Liberty office in Newnan, Georgia, for $581,000, although it is encumbered by a $160,000 lien. Hays has also auctioned off a high-value Patek Philippe watch belonging to Frost for $10,000.
Additionally, Hays has managed to recover over $300,000 in political donations made by the Frost family, funds that were originally derived from investor capital. These donations primarily supported far-right Republican candidates. However, the process of asset recovery has already cost Hays around $412,000, indicating that reclaiming the lost investor funds will be both lengthy and expensive.
Todd, who lost $750,000 and intended to use the returns to fund Christian missions, expressed deep dissatisfaction during the meeting. He characterized the situation as one where those responsible were fully aware of their fraudulent activities and marked it as a theft of what he referred to as "God’s money."
In light of these developments, Raffensperger has announced that attorney Jason Doss will take on the role of an investigative agent to enhance the office’s efforts. He is also proposing a new state law that would empower his office to demand direct repayments from fraudsters to investors. Currently, the office is limited to taking civil actions against offenders and relaying information to the receiver and relevant authorities.
It remains uncertain whether federal authorities will pursue criminal charges against those involved in the Ponzi scheme, with a spokesperson for Atlanta U.S. Attorney Theodore Hertzberg declining to comment on the ongoing investigation.
In the Georgia House, lawmakers affected by the scheme are advocating for a shift in securities regulation oversight to banking regulators. During a recent meeting, Noula Zaharis, Assistant Commissioner of Securities, cautioned that transferring responsibilities from Raffensperger's office could disrupt regulatory functions, as Ponzi schemes are typically sophisticated and challenging to detect. This issue has become a point of contention among Republicans, who are questioning the effectiveness of the current regulatory framework to prevent future frauds.
