The U.S. Securities and Change Fee (SEC) has filed civil prices and sought an emergency asset freeze in opposition to First Liberty Constructing & Mortgage, LLC, a lending establishment primarily based in Newnan, Georgia, and its founder and proprietor, Edwin Brant Frost IV. The SEC alleges that the agency and its proprietor orchestrated a Ponzi scheme that defrauded roughly 300 buyers of at the very least $140 million over greater than a decade.
Allegations in opposition to First Liberty: Excessive returns, false guarantees
In accordance with the SEC’s grievance, from 2014 by June 2025, First Liberty and Frost lured retail buyers with guarantees of high-yield returns of as much as 18% by promissory notes and mortgage participation agreements. Buyers have been instructed their funds can be used to make short-term bridge loans to companies at excessive rates of interest, with the reassurance that only a few loans had defaulted and that repayments would come from debtors, typically by way of Small Enterprise Administration or different business loans.
Nevertheless, the SEC alleges that almost all of those loans didn’t carry out as represented. By 2021, First Liberty was utilizing new investor funds to pay principal and curiosity to earlier buyers, a basic Ponzi scheme construction. The grievance additionally particulars Frost’s alleged misappropriation of investor cash for private use, together with over $2.4 million in bank card funds, greater than $335,000 spent at a uncommon coin supplier, and $230,000 on household holidays. Frost can be accused of utilizing investor cash to make over $570,000 in political donations.
Regulatory response and aid sought
The SEC’s grievance, filed within the U.S. District Court docket for the Northern District of Georgia, prices each First Liberty and Frost with violating antifraud provisions of federal securities legal guidelines. 5 entities managed by Frost are additionally named as aid defendants. The SEC is looking for an emergency asset freeze, the appointment of a receiver for the entities, everlasting injunctions, civil penalties, and disgorgement of ill-gotten good points with prejudgment curiosity.
With out confirming or denying the allegations, Frost and the aid defendants have consented to the SEC’s emergency and everlasting aid requests, with financial cures to be decided later by the court docket.
Political and neighborhood impression
Frost, a outstanding determine in Georgia Republican circles, is thought for his political donations and connections. The collapse of First Liberty has despatched shockwaves by Georgia’s conservative political community, with many buyers recruited by way of right-wing media and private connections. The corporate’s abrupt shutdown in late June left buyers and workers in limbo, with First Liberty’s web site stating that every one operations had been indefinitely suspended.
SEC’s warning to buyers
Justin C. Jeffries, Affiliate Director of Enforcement for the SEC’s Atlanta Regional Workplace, emphasised the recurring nature of such schemes:
“The promise of a excessive charge of return on an funding is a crimson flag that ought to make all potential buyers assume twice or perhaps even thrice earlier than investing their cash. Sadly, we’ve seen this film earlier than—unhealthy actors luring buyers with guarantees of seemingly over-generous returns—and it doesn’t finish nicely.”
The SEC is intensifying its give attention to defending retail buyers and prosecuting Ponzi schemes and different affinity frauds, particularly these concentrating on particular communities or leveraging political or spiritual networks. Buyers who consider they could have been affected are inspired to contact the Georgia Securities Division.