WASHINGTON, D.C. — The Securities and Exchange Commission (SEC) has initiated legal action against First Liberty Building & Loan, LLC, a financial company based in Georgia, along with its founder Edwin Brant Frost IV, for running a large-scale Ponzi scheme that deceived around 300 investors out of at least $140 million (See SEC Complaint).
In a lawsuit submitted to the U.S. District Court for the Northern District of Georgia, the SEC asserts that from 2014 until June 2025, Frost and First Liberty marketed high-yield promissory notes and loan participation agreements to retail investors, promising returns as high as 18%. Investors were led to believe that their funds would be used to provide short-term bridge loans to businesses, which would be repaid through Small Business Administration (SBA) loans or other forms of commercial financing.
Nevertheless, the SEC contends that the majority of these bridge loans either underperformed or completely defaulted. By 2021, the firm had reportedly transformed into a Ponzi scheme, utilizing funds from new investors to settle debts with earlier investors — a classic sign of fraudulent financial practices.
Misuse of Funds for Lavish Spending
Beyond misleading investors, the SEC’s complaint accuses Frost of misappropriating millions for personal expenses. These include:
- $2.4 million in credit card payments,
- Over $335,000 spent on rare coins,
- $230,000 spent on family vacations.
“These kinds of promises — high, steady returns with minimal risk — should always raise red flags for investors,” said Justin C. Jeffries, Associate Director of Enforcement for the SEC’s Atlanta Regional Office. “Sadly, this is yet another example of a familiar scheme where investors are duped by offers that seem too good to be true.”
Legal Action and Relief Sought
The SEC’s lawsuit accuses both First Liberty and Frost of breaching the antifraud regulations outlined in federal securities laws. Alongside Frost, five additional entities under his control have been identified as relief defendants, suggesting they purportedly obtained funds from investors through improper means.
The SEC is seeking:
A freeze of assets,
- The appointment of a receiver to oversee the companies,
- Expedited discovery and a full accounting,
- Permanent injunctions and civil penalties,
- Disgorgement of profits and interest.
Although they do not admit or deny the allegations, both the defendants and the relief defendants have agreed to the SEC’s request for emergency and permanent relief. The court will decide on monetary penalties and other remedies at a later time.
The investigation by the SEC was spearheaded by Justin Delfino and Tiffany Kunkle, with oversight from Peter Diskin and Justin Jeffries. The litigation is being managed by Kristin Murnahan and Graham Loomis.
On Friday, June 27, 2025, First Liberty Constituents halted all business activities. They announced on their website that
We regret to inform you that as of Friday, June 27, 2025, First Liberty has ceased all business operations. First Liberty will no longer be accepting promissory note investments or bridge loan participations, and it will not be making any new bridge loans. Interest payments on existing promissory notes, bridge loan participation interests, and other investment programs are indefinitely suspended. First Liberty is cooperating with federal authorities as part of an effort to accomplish an orderly wind-up of the business. First Liberty employees are not authorized to make any further communications at this time regarding the ongoing situation, and no one at the company will be available to answer phone calls or respond to email inquiries. First Liberty hopes to provide additional information and updates in the near future regarding the status of the company’s efforts to effectuate an orderly wind-up of the business.
