First Liberty Building & Loan Ponzi scheme: Rep. Scott blasts SEC's oversight

Newnan firm accused by feds of Ponzi scheme

Federal investigators accuse a Newnan business of defrauding investors in a massive Ponzi scheme. We?re hearing from the man listed in the federal complaint.

NEWNAN, Ga. - Congressman David Scott is calling for a sweeping investigation into the Securities and Exchange Commission’s failure to detect a massive Ponzi scheme run by Georgia-based First Liberty Building and Loan, which defrauded investors out of $140 million before federal regulators intervened.

What they're saying:

In a sharply worded letter sent Friday to SEC Chairman Paul Atkins, the metro Atlanta Democrat demanded accountability for what he described as years of regulatory inaction that allowed the scheme to grow unchecked. He questioned how both federal and state agencies failed to act despite glaring signs of fraud and past legal issues involving First Liberty.

"The scale and duration of this crime is staggering, and the apparent regulatory breakdown that allowed it to flourish under the nose of federal and state supervisors is unacceptable," Scott wrote. "This is not just a case of regulatory failure, it is a betrayal of the trust that everyday investors place in our financial system."

Scott cited a 2013 lawsuit alleging similar misconduct by the company and raised concerns that the SEC failed to investigate sooner, despite the firm's public profile and repeat violations. He criticized the agency for not flagging First Liberty’s use of Regulation D exemptions, which allowed it to bypass registration and disclosure requirements while continuing to operate without registering as a broker-dealer.

"What’s worse is that this isn’t the first time First Liberty has faced legal issues," Scott wrote, pointing to court documents accusing the lender of gross misstatements to secure investments more than a decade ago.

Scott also questioned the lack of coordination between the SEC and Georgia state regulators, noting that the state only opened an inquiry after the SEC filed its complaint on July 10. By that point, roughly 90 percent of First Liberty’s loan portfolio had defaulted.

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The congressman submitted 18 detailed questions seeking clarification on when the SEC first became aware of the scheme, how often the firm was examined, and what internal warnings or whistleblower reports may have been missed. He also demanded information about asset recovery efforts and whether victims—many of whom were not sophisticated investors—would be able to recoup any of their losses.

Scott asked whether the SEC will require First Liberty executives to admit wrongdoing, whether the Department of Justice has been involved, and whether the agency will issue a full public report on its handling of the case. He also inquired about whether any restitution programs, including federal deposit insurance, are being considered.

"The people of Georgia, especially those whose futures have been shattered by this scheme, deserve accountability—not silence," he wrote.

The backstory:

According to SEC filings and civil complaints, First Liberty used new investor funds to pay existing clients, issued falsified account statements showing nonexistent profits, and funneled money into shell companies and undisclosed real estate ventures. Many of its victims were retirees, small business owners, and faith-based organizations, drawn in by promises of 8 to 18 percent returns and aggressive marketing on social media.

What's next:

Scott requested a response from the SEC by August 8 and called for immediate transparency into what he called a failure that "enabled a $140 million Ponzi scheme to thrive in broad daylight."