Federal prosecutors charged the founder of a Georgia investment vehicle with wire fraud Thursday in connection with an alleged Ponzi scheme.
Edwin Brant Frost IV, owner and president of the defunct First Liberty Building and Loan, allegedly scammed those in his orbit in what the FBI and prosecutors described as a “classic” Ponzi scheme, using new investor funds to pay earlier investors while concealing significant financial losses.
“Frost abused the trust of his clients, family, and friends by allegedly soliciting investors with promises of sizable returns, while knowing the money raised would instead be used for his personal expenses and to pay early investors to maintain the illusion of profits,” U.S. Attorney Theodore S. Hertzberg said in a statement Thursday after Frost IV was arraigned in federal court in Atlanta.
Frost IV, 68, of Newnan, was released on bail after entering a plea of not guilty.
The Federal Bureau of Investigation, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Office of Georgia Secretary of State Brad Raffensperger investigated.
Frost IV is accused of steering over $570,000 to political contributions. Last year, Raffensperger’s office called on recipients to return the money.
Frost’s son, Brant Frost V, was chairman of the Coweta County Republican Party.
Hertzberg said Frost IV “represented” to investors that they would be compensated by borrowers who paid fees on “bridge” loans.
Instead, prosecutors said, First Liberty used investor money to pay off early investors and to fund more than $5 million of “personal and sometimes extravagant expenditures.”
Frost IV spent over $230,000 to rent a vacation home in Maine, over $140,000 to buy jewelry, $20,800 for a Patek Philippe watch and over $2 million on credit card bills, prosecutors claimed.
They said Frost IV did not disclose that borrowers had defaulted and that he continued to finance at least one of the defaulted companies.
Herztberg’s office said Frost IV raised at least $140 million from at least 300 investors.
