A former financial advisor and Georgia political figure Nathaniel Darnell last month was fined $500,000 by the Georgia Secretary of State’s Office and referred to a district attorney for potential criminal prosecution over allegations he deceived investors in First Liberty Building & Loan, according to several recent published reports.
The Securities and Exchange Commission last summer filed charges against Georgia-based First Liberty Building & Loan and its founder and owner Edwin Brant Frost IV in connection with an alleged Ponzi that defrauded approximately 300 investors of at least $140 million.
Darnell has served as president of the Georgia Republican Assembly, a conservative group once allied with First Liberty founder Brant Frost IV and his family, the Atlanta Journal-Constitution reported.
According to his BrokerCheck profile, Darnell was “discharged” or fired last September from Bankers Life Securities Inc., where he started working in 2016.
The allegations against Darnell for his termination were: failing to disclose outside business activities; participating in undisclosed and unapproved private securities transactions; and using unapproved, off-channel communications with clients, according to his BrokerCheck profile.
He is involved in five investor complaints alleging close to $3 million in damages, according to BrokerCheck.
In its cease-and-desist order, Georgia Secretary of State Brad Raffensperger’s office alleged Darnell used religion and shared political views to recruit some of his clients and steered them toward investments in First Liberty, according to the report.
“Darnell sold unregistered First Liberty investments to nearly four dozen clients without telling his employer, the complaint said, and concealed from clients and his employer that he earned commissions,” according to the report. “Those commissions totaled nearly $250,000 over several years.”
The Georgia order barred Darnell from working as an investment advisor, along with the half-million-dollar civil penalty.
According to the report, the order said Darnell violated his fiduciary duties and “engaged in manipulative conduct when he preyed on senior citizens to invest substantial amounts of their retirement” into First Liberty. It also said he engaged in dishonest and unethical practices in the securities business.
In a statement to the Atlanta Journal-Constitution, Darnell’s attorney Douglas Gilfillan said: “Mr. Darnell denies the allegations in the Emergency Order. Mr. Raffensperger has rushed to judgment and improperly rushed to the press for his own political gains.”
First Liberty Building & Loan advertised itself as a trusted, faith-based lender across conservative media in Georgia and beyond.
The SEC claimed in its lawsuit that Frost IV orchestrated the $140 million Ponzi scheme that funneled millions to the family and to boost conservative causes, according to the report.
First Liberty’s assets were frozen by federal authorities and Frost IV publicly apologized. No criminal charges have been filed so far in that case.
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