A prominent Georgia Republican accused of orchestrating a $156 million Ponzi scheme has entered a not guilty plea to a federal wire fraud charge, though prosecutors anticipate he will change his plea next month.
Charges and Plea
Edwin Brant Frost IV, 68, of Newnan, waived indictment before pleading not guilty on Thursday to a single count of wire fraud. This step is typically a precursor to a later guilty plea in federal courts. Frost has publicly apologized for his role and remains free on bail.
U.S. Attorney Theodore Hertzberg told The Associated Press that Frost is “not going to contest the charges” and is likely to plead guilty in early May. He added that federal prosecutors could consider charges against others depending on the evidence.
The Scheme
The charge stems from the collapse of First Liberty Building and Loan last June. The company claimed to invest funds in short-term, high-interest loans to businesses, promising investors up to 18% annual interest. However, prosecutors allege Frost used new investors' money to pay previous investors—the hallmark of a Ponzi scheme. They also claim he siphoned more than $5 million for personal expenses, including over $140,000 on jewelry, more than $230,000 to rent a vacation home in Kennebunkport, Maine, and over $2 million on credit card bills.
Losses and Sentencing
While First Liberty took in $156 million, the actual loss is at least $65 million because some investors were repaid. The charge carries a maximum 20-year prison sentence, but the recommended sentence will depend on the amount determined stolen. Hertzberg said prosecutors intend to recommend a sentence near the top of the range, noting the “very significant” loss.
Investors and Fallout
Among those who lost money were a company run by former Georgia GOP Chairman David Shafer, Alabama State Auditor Andrew Sorrell, and a political action committee controlled by Sorrell. Many grassroots Republicans also lost money, some lured by ads on conservative shows hosted by Erick Erickson, Hugh Hewitt, and Charlie Kirk.
The U.S. Securities and Exchange Commission filed a civil lawsuit last year against Frost and First Liberty. Georgia Secretary of State Brad Raffensperger's office has levied $500,000 in civil fines against three individuals who allegedly helped solicit investments and has asked state prosecutors to consider criminal charges against them.
Recovery Efforts
A federal judge appointed a receiver to recover funds for investors. As of March 23, the receiver held $5.16 million in cash and was pursuing nearly 30 unpaid loans made by First Liberty.
