A Georgia savings and loan and its owner are facing a civil enforcement action over charges that they defrauded hundreds of investors through a Ponzi scheme.
In a press release, the Securities and Exchange Commission detailed its case against Newnan, Georgia-based First Liberty Building & Loan, LLC and its founder and owner Edwin Brant Frost IV.
The SEC’s complaint, filed in the U.S. District Court for the Northern District of Georgia, said the alleged violations span a period from approximately 2014 through June 2025. According to the commission, First Liberty and Frost sold retail investors promissory notes and loan participation agreements that offered returns of up to 18%, by representing that the investor funds would be used to make short-term bridge loans to businesses at relatively high interest rates. The investors were told that very few of these loans had defaulted and that they would be repaid by borrowers via the Small Business Administration or other commercial loans.
But while some investor funds were used to make bridge loans, the SEC said, those loans did not perform as represented, and most loans ended up defaulting and stopped making interest payments. Furthermore, it was alleged that since at least 2021, ” First Liberty operated as a Ponzi scheme by using new investor funds to make principal and interest payments to existing investors.” Overall, it was determined that the scheme defrauded about 300 investors out of at least $140 million. Frost was accused of misappropriating investor funds for his personal use, including making over $2.4 million in credit card payments, more than $335,000 to a rare coin dealer, and spending $230,000 on family vacations.
“The promise of a high rate of return on an investment is a red flag that should make all potential investors think twice or maybe even three times before investing their money,” said Justin C. Jeffries, Associate Director of Enforcement for the SEC’s Atlanta Regional Office. “Unfortunately, we’ve seen this movie before – bad actors luring investors with promises of seemingly over-generous returns – and it does not end well.”
First Liberty and Frost were charged with violating the antifraud provisions of the federal securities laws and five entities that Frost controlled were named as relief defendants. The SEC is seeking emergency relief, including an order freezing assets, appointing a receiver over the entities, and granting an accounting and expedited discovery. The SEC also seeks permanent injunctions and civil penalties against the defendants, a conduct-based injunction against Frost, and disgorgement of ill-gotten gains with prejudgment interest against the defendants and relief defendants.
The defendants and relief defendants did not admit or deny the allegations but consented to the SEC’s requested emergency and permanent relief. The monetary remedies to be determined by the court at a later date.
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