The U.S. Securities and Trade Fee (SEC) has filed civil fees 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 traders of at the very least $140 million over greater than a decade.
Allegations in opposition to First Liberty: Excessive returns, false guarantees
Based on the SEC’s criticism, from 2014 by June 2025, First Liberty and Frost lured retail traders with guarantees of high-yield returns of as much as 18% by promissory notes and mortgage participation agreements. Buyers had been informed their funds could be used to make short-term bridge loans to companies at excessive rates of interest, with the peace of mind that only a few loans had defaulted and that repayments would come from debtors, typically through Small Enterprise Administration or different industrial loans.
Nonetheless, the SEC alleges that the majority 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 traders, a traditional Ponzi scheme construction. The criticism 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 reduction sought
The SEC’s criticism, filed within the U.S. District Courtroom for the Northern District of Georgia, fees each First Liberty and Frost with violating antifraud provisions of federal securities legal guidelines. 5 entities managed by Frost are additionally named as reduction 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 beneficial properties with prejudgment curiosity.
With out confirming or denying the allegations, Frost and the reduction defendants have consented to the SEC’s emergency and everlasting reduction requests, with financial cures to be decided later by the court docket.
Political and group influence
Frost, a outstanding determine in Georgia Republican circles, is understood for his political donations and connections. The collapse of First Liberty has despatched shockwaves by Georgia’s conservative political community, with many traders recruited through right-wing media and private connections. The corporate’s abrupt shutdown in late June left traders and workers in limbo, with First Liberty’s web site stating that each one operations had been indefinitely suspended.
SEC’s warning to traders
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 pink flag that ought to make all potential traders suppose twice or possibly even 3 times earlier than investing their cash. Sadly, we’ve seen this film earlier than—unhealthy actors luring traders with guarantees of seemingly over-generous returns—and it doesn’t finish effectively.”
The SEC is intensifying its give attention to defending retail traders and prosecuting Ponzi schemes and different affinity frauds, particularly these focusing on particular communities or leveraging political or non secular networks. Buyers who imagine they might have been affected are inspired to contact the Georgia Securities Division.
