Alleged Ponzi scheme preyed on its own — ‘patriot brothers and sisters’

That sales job worked. Some 300 people ponied up at least $140 million in hard-earning savings — an average of a whopping $466,000 per investor.

Yet federal regulators are accusing First Liberty of fleecing its loyal followers by using “devices, schemes and artifices to defraud” its investors.

If what they allege is true, First Liberty cared more about padding their wallets with millions of illegally obtained dollars than its flag-waving, God-fearing investors.

It’s a stretch to liken risky investments to raising the flag at Iwo Jima. But calls to emotion are strong.

Patriots, give us a call! And have your routing number handy.

Simply put, longtime financier and right-wing political activist Brant Frost IV and his company (and a handful of affiliates) ran a Ponzi scheme, the U.S. Securities and Exchange Commission said.

Credit: Screenshot

Credit: Screenshot

“The promise of a high rate of return on an investment is a red flag that should make all potential investors think twice or maybe even three times before investing their money,” an SEC official said last week after filing the federal lawsuit.

Or, as your mom told you: If it sounds too good to be true, it probably is.

Unfortunately, pyramid schemes proliferate. There are always folks, often unsophisticated in the art of investing, who hope to get a better return on their savings.

And there’s an endless supply of people stepping up to fleece them.

That’s what the SEC alleges happened here.

First Liberty told investors it specialized in making short-term loans to businesses at high interest rates. Money from investors was to fund these loans, and then they’d profit when the companies repaid them.

The firm touted a slogan: “We say yes when the big banks say no.”

But there’s a reason big banks say “No.” How do you think they got to be big?

Something bad happened in their business model, probably around 2021 — perhaps a bad loan, or many of them. It seems Frost was terrible at determining who might pay him back, the SEC alleged.

Potentially 90% of the First Liberty loans went to deadbeats, regulators said. Remember that the interest flowing from those loans was supposed to pay off the mom-and-pop investors? Instead, Liberty needed new moms and pops to pay the interest to the earlier ones, the SEC says.

Frost and family are well known in Republican political circles. Frost was a Pat Robertson aide during the televangelist’s 1988 run for president and has been on the ground floor for the party’s conservative/religious lurch to the right.

His son, Brant Frost V (it’s like a lineage of dukes), continued the tradition as a GOP leader in Coweta County, even volunteering with the U.S. Senate campaign for former Alabama Chief Justice Roy Moore in 2017.

You remember Moore? He’s the candidate who was so far out there that a Democrat won in ‘Bama.

In 2021, the First Liberty businesses started going underwater, the SEC said.

In August 2022, a First Liberty borrower filed for bankruptcy. Nevertheless, Frost & Co. allegedly raised $6.5 million from investors to loan that same borrower.

“It’s like the gambler trying to chase the one big payday,” said Craig Kuglar, an attorney who is taking up cases on behalf of some of First Liberty’s investors.

Often pyramid schemes start after something bad happens, Kuglar said. The company will try to right the ship by cutting corners and paying older investors with what they raised from new ones, hoping things shape up.

It’s a recipe for disaster because the more new investors you get, the more you’re on the hook.

In 2024, First Liberty trotted out a “more widespread public solicitation” for investors, the SEC said, expanding from the previous “friends and family.” They advertised on conservative podcasts and radio, including “The Erick Erickson Show.”

Erickson has called the Frosts a “good Christian family.” Conservative host Hugh Hewitt likened Frost to George Bailey of “It’s a Wonderful Life.”

With plugs like that, why wouldn’t you trust them?

In recent years, mostly at a time when Frost & Co. were trying to save the company, Frost spent profligately, the SEC alleges: $230,000 over several years to rent a Kennebunkport vacation home; $335,000 in rare coins; $140,000 in jewelry; $2.4 million in credit card purchases and $570,000 to GOP causes and candidates.

He also allegedly transferred $5 million to him and his family.

Credit: Screenshot

Credit: Screenshot

Last year, Brant V, the son, went on Real America’s Voice, a right-wing online station, to peddle the new offerings.

He noted First Liberty was a 30-year-old firm and “up until now we’ve kept it close to the vest, but we’d like to share those opportunities with our patriot brothers and sisters.”

Brant V mentioned his heartland investors included “retired teachers, retired ministers, as well as doctors, lawyers and anyone you can imagine.”

One investor, it turns out, was a retired small contractor who long ago redid my kitchen.

Jim Clancy, a Texas lawyer representing numerous investors, called this an “affinity scam,” where the victims are like-minded folks.

Brant IV, who did not return calls, has said: “I take full responsibility for my actions and am resolved to spend the rest of my life trying to repay as much as I can to the many people I misled and let down.”

“He’s trying to whitewash the responsibility of others,” Clancy told me. “We know there were others. We read the texts and emails. … This is not a one-man show.”

Lots of shoes left to drop.