The court-appointed official trying to recoup money for jilted investors of First Liberty Building & Loan is trying to take over assets of a business belonging to the wife of the failed lender’s founder.
Krista Frost is seeking to protect her company and its funds from the receiver sifting through the remains of Newnan-based First Liberty and working to recover money for investors of the alleged $140 million Ponzi scheme.
Federal securities regulators accused First Liberty and its founder, Brant Frost IV, in a civil case of misleading investors through a complex web of loans and investor payouts, using new investor funds to pay earlier investors.
Credit: First Liberty Building and Loan YouTube via AJC
Credit: First Liberty Building and Loan YouTube via AJC
Frost IV pleaded guilty last month to a wire fraud charge in a parallel criminal case tied to the collapse of First Liberty. He is scheduled for sentencing Aug. 14.
First Liberty abruptly shut down in June last year and the SEC soon after sued Frost IV, alleging he diverted investor money to pay for more than $5 million on personal items, such as more than $2 million on credit card bills, $230,000 on rent on a vacation home in Maine, more than $140,000 on jewelry, including a $20,800 Patek Philippe watch, and hundreds of thousands on political contributions.
First Liberty pitched its business through conservative media as part of a “patriot economy” and that it would say yes when big banks said no. The Frost family emerged over the years as a potent force in Georgia Republican politics.
The court-appointed receiver for First Liberty, S. Gregory Hays, has been working to recover money to pay back investors. Hays moved to place Family Financial Partners, a company owned by Frost’s wife, Krista Frost, into receivership, which is a process that is separate from the criminal case against Frost IV.
But an attorney for Krista Frost and her company submitted a filing to the court challenging the move, The Newnan Times-Herald first reported.
Notably, Family Financial Partners’ assets include stock in Old Glory Bank, a conservative-leaning bank co-founded by former presidential candidate and former Housing and Urban Development Secretary Ben Carson that plans to go public on the Nasdaq through a special purpose acquisition company transaction.
Krista Frost’s attorney, noted Atlanta criminal defense lawyer Don Samuel, in a May 26 filing said it was “inaccurate” that money to buy stock was “derived from fraudulent activity.”
The money used to buy the stock “was ‘clean’ money and therefore is not subject to the Receivership proceedings,” he wrote in the filing.
Credit: Miguel Martinez/AJC
Credit: Miguel Martinez/AJC
And, the filing said the Old Glory Bank stock is “subject to a lock-up agreement which will not permit the disposition of any of this stock until early 2027 at the earliest.”
Samuel’s filing also said Family Financial Partners was not served with the motion to add it to the receivership, along with all of its assets.
U.S. District Judge Michael Brown issued a May 28 order granting Family Financial Partners’ motion to intervene in the First Liberty receivership to respond to the motion, saying the court finds the company “has a substantial interest at stake and has shown good cause to intervene.”
The court gave Family Financial Partners a few weeks to make its case in a response to the receiver’s motion, then the receiver has another few weeks to reply on the matter.
Hays said the receiver estate “will pursue the claims it has against Mrs. Frost on behalf of the investors.”
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