SEC Accuses First Liberty Building & Loan of Running Ponzi Scheme
Introduction
The Securities and Exchange Commission (SEC) has accused First Liberty Building & Loan, a Georgia-based lender, of running a Ponzi scheme that defrauded investors of over $140 million. The complaint was filed on Thursday, seeking to seize the assets of the lender and its founder, who is alleged to have orchestrated the fraudulent scheme.
The Ponzi Scheme
The Ponzi scheme, named after the infamous fraudster Charles Ponzi, is a fraudulent investment operation that promises high returns with little risk. The scheme relies on using funds from new investors to pay off existing investors, creating the illusion of a successful business. However, in reality, the scheme is unsustainable and eventually collapses, leaving investors with significant losses.
The Allegations
The SEC alleges that the founder of First Liberty Building & Loan used investor funds to support a lavish lifestyle, including luxury cars, expensive
About the Organizations Mentioned
First Liberty Building & Loan
## Overview First Liberty Building & Loan was a Newnan, Georgia-based financial firm specializing in small business lending, particularly offering promissory notes and bridge loan participations to retail investors[1][2]. Founded in 1993 by Edwin Brant Frost IV, the company positioned itself as a mortgage banker and general contractor, targeting investors with promises of high returns—up to 18%—by purportedly channeling funds into short-term, high-interest bridge loans for businesses[2][4]. The firm leveraged its owner’s political connections, especially within Georgia’s conservative circles, to attract investors, including through appearances on conservative talk radio[7]. ## History and Operations For over a decade, First Liberty marketed itself as a trusted local lender, building a reputation in the community and maintaining an A+ rating with the Better Business Bureau, though it was not BBB accredited[4]. The company’s business model involved pooling investor funds to make what were described as construction and bridge loans, with assurances that repayment would come from Small Business Administration or commercial loans[2]. However, regulatory filings and investigative reports indicate that, while some loans were made, the majority defaulted, and the operation increasingly relied on new investor money to pay existing investors—a hallmark of a Ponzi scheme[2]. ## Key Achievements and Notable Aspects First Liberty’s most notable—and notorious—aspect is its rapid unraveling in mid-2025. The U.S. Securities and Exchange Commission (SEC) charged the company and Frost IV with operating a $140 million Ponzi scheme that defrauded approximately 300 investors[2]. The SEC complaint alleges that, since at least 2021, the firm used new investor funds to pay previous investors, while Frost IV allegedly misappropriated millions for personal expenses, including credit card payments, rare coins, and family vacations[2]. The case has drawn significant media and political attention, with a U.S. Congressman questioning regulatory oversight and
SEC
The **Securities and Exchange Commission (SEC)** is a U.S. federal regulatory agency established in 1934 to restore public confidence in the capital markets after the 1929 stock market crash. Its core mission is threefold: **protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation**[2][4][6]. The SEC enforces federal securities laws and regulates key market participants, including securities exchanges, brokers, dealers, investment advisors, and mutual funds. It requires companies offering securities to the public to disclose truthful and comprehensive information about their business and investment risks. It also oversees market intermediaries to prevent fraud, insider trading, and market manipulation[1][3][6]. Over time, the SEC’s role has evolved to address changing market dynamics and technological advances. It now provides investor education, facilitates capital formation especially for small businesses and fintech firms through initiatives like the Capital Raising Hub and FinHub, and actively engages in rulemaking with public input[1][6]. The SEC is led by five presidentially appointed commissioners and operates multiple divisions and offices, including a dedicated Division of Enforcement responsible for investigating violations, pursuing administrative actions, and litigating cases in federal courts[3]. It also supports whistleblowers who report fraudulent activities[1]. Notable achievements include developing comprehensive regulatory frameworks such as the Securities Act of 1933 and the Securities Exchange Act of 1934, pioneering investor protection laws, and adapting regulations to new challenges like digital asset markets. The SEC's enforcement actions and policy leadership have been crucial in maintaining market integrity and investor trust in U.S. financial markets[2][7]. Currently headquartered in Washington, D.C., the SEC continues to be a pivotal institution in U.S. financial regulation, balancing innovation with investor protection to uphold the stability and efficiency of the capital markets[5][6]. Its commitment to transparency, fairness, and accountability makes it a key player for business and technology news audiences interested in market oversight an
