SEC Seeks Asset Freeze and Emergency Relief Against First Liberty Building & Loan
The Securities and Exchange Commission has filed emergency enforcement proceedings against First Liberty Building & Loan, LLC, a Newnan, Georgia-based lender, and its founder, Edwin Brant Frost IV, in connection with an alleged Ponzi scheme that raised more than $140 million from approximately 300 investors.
According to the SEC’s complaint, filed in the U.S. District Court for the Northern District of Georgia, Frost and First Liberty misrepresented the nature, performance, and safety of promissory note investments and used investor funds to enrich Frost personally, in violation of federal securities laws.
Fraudulent Offering of Promissory Notes and Loan Participations
From 2014 through June 2025, Frost and First Liberty solicited retail investors to purchase promissory notes and loan participation agreements, representing that investor capital would fund short-term, high-interest bridge loans to businesses. The offerings promised returns as high as 18%, supported by purportedly low-risk lending and high borrower repayment rates.
According to the SEC, these representations were false. While some funds were initially directed toward short-term business loans, the loans frequently failed to perform as represented. Most ultimately defaulted or stopped making payments altogether, undermining the integrity of the investment program.
Transition into a Ponzi Scheme by 2021
By at least 2021, the operation had devolved into a classic Ponzi scheme, with new investor money used to pay interest and principal to earlier investors. The SEC alleges that Frost and First Liberty concealed the collapse of loan performance and relied on new capital to perpetuate the illusion of legitimate operations.
SEC Alleges Extensive Personal Use of Investor Money
In addition to operating a fraudulent investment scheme, Frost allegedly misappropriated investor funds for personal use. The complaint details millions in improper expenditures, including:
- Over $2.4 million in credit card payments
- More than $335,000 paid to a rare coin dealer
- Approximately $230,000 spent on family vacations
None of these expenditures were disclosed to investors or related to legitimate business activities. Instead, they were funded through diverted investor assets, in violation of the antifraud provisions of the federal securities laws.
Complaint Seeks Injunctive Relief, Receivership, and Disgorgement
The SEC’s complaint charges Frost and First Liberty with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, along with Rule 10b-5.
The Commission also named five entities controlled by Frost as relief defendants, seeking the return of ill-gotten gains received from investor funds.
The SEC seeks the following emergency and permanent remedies:
- Asset freeze against Frost and First Liberty
- Appointment of a receiver to manage the corporate entities and marshal assets
- Expedited discovery and full accounting of assets
- Permanent injunctions against future securities violations
- Conduct-based injunction barring Frost from participating in any securities offerings
- Disgorgement of ill-gotten gains with prejudgment interest
- Civil penalties against all defendants
SEC Warns Investors About Overpromised Returns
Justin C. Jeffries, Associate Director of Enforcement for the SEC’s Atlanta Regional Office, emphasized the risks of investments promising outsized returns:
“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. Unfortunately, we’ve seen this movie before—bad actors luring investors with promises of seemingly over-generous returns—and it does not end well.”
Ongoing Litigation to Determine Monetary Penalties
Without admitting or denying the allegations, Frost, First Liberty, and the relief defendants consented to the SEC’s requests for emergency and injunctive relief. The U.S. District Court will determine the scope of monetary remedies, including civil penalties and disgorgement, at a later stage.
Editor’s Note: Readers are reminded that the SEC often over-charges, and ultimately backs down on its charges once a target mounts a defense. Unless the release indicates that the respondent has settled the charges, these are the SEC’s allegations, not evidence of wrongdoing. The respondent has not yet had the opportunity to present evidence or to counter the allegations contained in the SEC Press Release.
For more information, contact the securities lawyers at Sallah Astarita & Cox, at 212-509-6544 or visit Securities Lawyer
