The fallout from an alleged $140 million Ponzi scheme involving First Liberty Building & Loan is showing up in the language of investors—who say they have waited for returns for months and are now pressing state officials for action. Seven months after the company collapsed, some people who said they lost hundreds of thousands of dollars met with Georgia Secretary of State Brad Raffensperger, telling his office they are uncertain they will ever see their money back.
Raffensperger said his office is stepping up anti-fraud efforts, according to people in the meeting, even as Republican state lawmakers debate whether securities regulation should be transferred from his securities division to the Georgia Department of Banking and Finance. The political fight around that proposal is likely to become more prominent as Raffensperger runs for governor and heads into Georgia’s May Republican primary.
Federal investigators said the company defrauded at least 300 investors of at least $140 million. In a U.S. Securities and Exchange Commission lawsuit described by The Associated Press, the scheme promoted by Brant Frost IV and First Liberty was portrayed as paying investors up to 16% annual interest, while prosecutors alleged that Frost diverted money for himself, relatives and affiliated companies and that borrowers failed to repay millions in loans.
Among those discussing their losses with Raffensperger was Thomas Todd, a 77-year-old retired business owner. Todd told Raffensperger that he felt “we’re never going to see it,” and he said he lost $750,000, noting that First Liberty collapsed just before he invested more. Todd said the income he expected to receive was intended to fund Christian missions, which he described as “God’s money,” adding that he believed the operators knew what they were doing.
Raffensperger’s office has also moved to increase scrutiny, and it recently announced lawyer Jason Doss as an investigative agent. Raffensperger’s proposal for a new state law would give his office authority to require fraudsters to directly repay investors, while for now the office is limited to civil actions against wrongdoers and providing information to the receiver and state and federal prosecutors.
It is not clear whether federal prosecutors will pursue criminal charges. A spokesperson for U.S. Attorney Theodore Hertzberg declined to comment on Monday, according to the AP report.
As the case enters its recovery phase, a federal court has appointed receiver Gregory Hays to try to regain assets for investors. Hays wrote on Jan. 30 that his team is still working to piece together 48,000 financial transactions, and he said some borrowers are fighting efforts to keep real estate and other collateral that the receiver says was pledged to secure loans.
Hays reported $3.59 million in assets on hand as of Dec. 31. Since then, an auctioneer has sold five luxury vehicles that the Frost family handed over, netting almost $139,000, and the receiver is also selling the First Liberty office in the Atlanta suburb of Newnan for $581,000, though he said the sale requires resolving a $160,000 lien on the property. The receiver also sold a Patek Phillipe watch for $10,000, and he said he has received more than $300,000 back from over 1,000 political donations the Frost family made using more than $1 million in investor funds.
Hays said he has already spent $412,000 from investor money and warned that recovery would be costly. In his letter, he said asset recovery “will be an expensive and protracted process,” describing how slow the process can be for people still waiting on returns.
The scheme has also prompted scrutiny in Georgia’s legislature, where Republican lawmakers who say they heard from defrauded constituents are pushing to shift securities oversight. Assistant Commissioner of Securities Noula Zaharis told a House Banks and Banking Committee hearing that transferring staff and responsibilities away from Raffensperger’s office on July 1—under House Bill 934—could disrupt regulation, and she said Ponzi schemes can be difficult to detect. Zaharis said, “Schemes like this are set up to create an illusion and they are schemes that pay,” arguing that oversight work is challenging.
Republicans faulted Zaharis’s office and, by extension, Raffensperger’s securities division for not catching the First Liberty operation before it collapsed. State Rep. Carter Barrett of Cumming said he “just don’t really see a system or plan in place to preemptively identify these things and eliminate these bad actors before they get too far gone,” underscoring what investors and lawmakers are now debating: whether the state can prevent similar losses or only respond after the damage is done.