Receiver’s First Status Report: over 1M of investor funds used for political donations

In the ongoing SEC investigation of First Liberty Building and Loan-allegedly a Ponzi scheme that defrauded investors of over $140 million-the court-appointed Receiver, S. Gregory Hays filed his first status report on July 21st. The finding details early discoveries in the investigation, including nearly 1,000 political donations totalling over a million dollars, all allegedly using investor’s funds.

According to the report, the investigation has found concerning financial acts in First Liberty’s operations.

“The Receiver has already discovered a number of irregularities with loans and is working to understand complicated transactions that were not well documented or tracked properly,” the report states. “In general, the loan files are problematic since First Liberty: a) poorly maintained records; b) had issues that were not disclosed to investors; c) continued paying interest on loans that were paid off and did not return capital to investors; and d) carried loans on books when the loans never paid any interest.”

The Receiver found that the loan records were often unreliable. Some schedules indicated loans had been paid off, but included incorrect payoff figures and failed to reflect the principal balance not being repaid.

The Frost family, who ran First Liberty, consistently made both personal and company donations to political candidates and organizations. The report suggests these donations often came from investor funds.

“First Liberty routinely used investor funds to make charitable donations and gifts as well as campaign contributions to political candidates,” the Receiver wrote. “First Liberty appears to have directly, indirectly or through the Frost family made almost 1,000 political ‘donations’ totalling over $1 million using investor funds.”

Some campaign contributions have already been returned to the Receiver, and more political entities continue to reach out requesting return instructions. The report directs any politician wishing to return campaign contributions or other donations received from either First Liberty or the Frost family should mail them and make the checks payable to S. Gregory Hayes, Receiver for First Liberty Building and Loan, to: Hays Financial Consulting at Suite 555, 2964 Peachtree Road NW, Atlanta, Georgia 30305. After receiving the funds, the Receiver states he plans to deposit the funds into a segregated account. 

As of the report’s filing, the Receiver has seized approximately $1.2 million in cash assets. Efforts to recover additional assets from Frost and other parties are ongoing.

“The Receiver and the Receiver’s Professionals are also examining assets that may be recovered from Frost and other parties, including, but not limited to assets: a) attributable to funds derived from investors or clients of the Receivership Entities, Defendants; b) held in constructive trust for the Receivership Entities; and/or c) that may otherwise be includable as Recoverable Assets, as that term is defined in the Appointment Order,” the statement reads.

There is currently no proof of claim form available, as the investigation remains in early stages. However, the Receiver is urging investors to begin compiling all documentation related to their claim so that they’re prepared when the form is posted to the Receiver’s website.

As the SEC continues to investigate First Liberty, Secretary of State Brad Raffensperger’s Securities Division has also launched an investigation into First Liberty, asking victims of the defrauding to fill out a brief confidential survey and contact [email protected] with any questions. 

“We are committed to protecting Georgians who may have been misled. Our division works tirelessly to ensure transparency and accountability in the securities marketplace,” said Secretary of State Brad Raffensperger. “Public input is vital to that mission.”

As for the SEC’s investigation, individuals with information regarding Receivership Assets or potential recovery efforts are asked to contact The Receiver by email at [email protected] or call 404-926-0060.