The Securities and Exchange Commission accused a Georgia Republican of running an elaborate Ponzi scheme in a civil lawsuit filed Thursday that scammed 300 investors out of $140 million.
Edwin Brant Frost IV is also accused of pocketing $17 million for himself, his family, and affiliated companies, as well as spending $573,000 on political donations to Republicans. On Friday, he issued a public apology.
“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,” Frost said. “I will be cooperating with the receiver and federal authorities and ask that everyone allow the receiver time to sort things out and do his best to repair the damage I created.”
The statement comes shortly after a federal judge froze Frost’s personal and corporate assets and ordered him to pay back the stolen money with interest and fines. The SEC requested the order, and Frost agreed to the terms. In doing so, he did not admit to or deny any allegations.
In its lawsuit, the agency’s investigators said Frost’s company, First Liberty Building and Loan, lied to investors about lending high-interest loans to small firms. The company’s loans did not perform well, forcing it to raise more money from new investors to repay existing investors.
Frost then used the investor funds for personal use, paying over $2.4 million in credit card payments, $335,000 to buy gold coins, $320,000 on a vacation home in Maine, $160,000 on jewelry, and $20,800 on a Patek Philippe watch.
“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,” Justin Jeffries, associate director for the SEC’s Atlanta Regional Office, said in a statement. “Unfortunately, we’ve seen this movie before — bad actors luring investors with promises of seemingly over-generous returns — and it does not end well.”
The SEC filed its complaint in the U.S. District Court for the Northern District of Georgia.
The judge appointed a receiver who will manage Frost’s assets, examine his finances, and claw back money. Under the agreement, Frost or First Liberty may now face no other lawsuit.
The SEC said the defendant’s business only had $2.67 million in cash as of May 30. The business collapsed on June 27, 11 days after Frost asked for more money from investors via email.
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Frost, a well-known Georgia Republican, has been on the political scene since 1988 when he managed Christian televangelist Pat Robertson’s unsuccessful state campaign for the Republican Party’s presidential nomination. Frost’s children are also involved in Georgia Republican politics.
It remains to be seen if the Justice Department will pursue criminal charges against Frost for the $140 million Ponzi scheme. Georgia Secretary of State Brad Raffensperger is currently investigating his company for possible violations of securities law.