SEC charges Georgia lending firm in $140M Ponzi scheme

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. - Federal regulators have charged a Georgia lending company and its owner with operating a $140 million Ponzi scheme that defrauded hundreds of investors over more than a decade.

Ponzi scheme uncovered by SEC

What we know:

The Securities and Exchange Commission announced Thursday that it filed a civil complaint against First Liberty Building & Loan, LLC, a now-shuttered Newnan-based firm, and its founder, Edwin Brant Frost IV. The SEC alleges the firm misled investors into purchasing promissory notes and loan participation agreements with promised returns of up to 18 percent.

According to the SEC, Frost and First Liberty told investors their money would be used to make short-term bridge loans to small businesses at high interest rates. Investors were led to believe that the loans were low-risk, typically repaid by borrowers through commercial or Small Business Administration financing.

But regulators say the truth was starkly different. While some funds were used to make business loans, most of those loans defaulted and failed to pay interest. Since at least 2021, the SEC alleges, the company relied on new investor money to pay earlier investors—a classic Ponzi scheme.

The SEC also accused Frost of misappropriating millions in investor funds for personal expenses, including $2.4 million in credit card payments, $335,000 to a rare coin dealer, and $230,000 on family vacations.

The complaint, filed in U.S. District Court for the Northern District of Georgia, seeks emergency relief including an asset freeze, the appointment of a receiver, and an order for expedited discovery. It also requests permanent injunctions, civil penalties, and the return of ill-gotten gains.

Approximately 300 investors were impacted by the scheme, according to the SEC.

The case is being handled by the SEC’s Atlanta office, with litigation led by Kristin Murnahan and Graham Loomis.

What they're saying:

"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 customers

Dig deeper:

Jim Clancy is a Texas-based attorney who represents several victims, including a family member who were allegedly defrauded. He says everyone feels betrayed.

"Sad that someone would use someone's faith in God and faith in our country to steal their money," Clancy said. "I have pursued many fraud and embezzlement cases over my 30 year career, but I've never seen one like this.

"These were families’ life savings," said Marcy Walker, who knows several victims. "I know one family that may not even be able to send their kids back to the schools that they’ve chosen because they’ve lost so much money."

First Liberty promoted itself through conservative and Christian media outlets. In a promotional video on YouTube, Frost described the company as one that helps "mainstream entrepreneurs to buy, build and grow things for virtually any kind of commercial project."

The SEC alleges investor funds were also used for Frost’s personal expenses, including $2.4 million in credit card payments and $230,000 on family vacations.

"It is horrible to take people’s money in the name of patriotism, in the name of Jesus," Walker said.

First Liberty Building & Loan responds

The other side:

Frost and the company consented to the SEC’s emergency and permanent relief requests without admitting or denying the allegations. Monetary penalties will be determined by the court at a later date.

First Liberty officially ceased operations on June 27, according to a notice posted on its website. The company stated it will no longer accept investments or issue loans and that all interest payments are indefinitely suspended. The firm said it is cooperating with federal authorities to wind down the business but will not respond to phone calls or emails.

Joshua A. Mayes, of Robbins Alloy Belinfante Littlefield LLC, is representing Front. He released a statement attributed to Frost:

"I take full responsibility for my actions and am resolved to spend the rest of my life trying to repay as much as I can to the many people I misled and let down. I will be cooperating with the receiver and federal authorities and ask that everyone allow the receiver time to sort things out and do his best to repair the damage I created. I would like to apologize personally to those I have harmed, but I am under restrictions which prevent me from doing so. While I do not deserve it, I am grateful for the support of friends and family as I confront this situation I created."