SEC Accuses First Liberty Building & Loan of $140M Ponzi Scheme

The U.S. Securities and Exchange Commission (SEC) has accused Edwin Brant Frost IV and his business, First Liberty Building & Loan, of orchestrating a Ponzi scheme that defrauded 300 investors of $140 million. The scheme allegedly unfolded after Frost's loan business collapsed, leaving investors with significant losses.

The SEC's complaint details that between 2014 and June 2025, First Liberty Building & Loan offered investors promissory notes and loan participation agreements, promising returns of up to 18% for short-term loans to businesses. These loans were purportedly at high interest rates with a low default risk. Frost and his company assured investors that any defaulted loans would be repaid by borrowers using funds from the Small Business Administration or other commercial lenders.

However, since 2021, the SEC alleges that Frost operated First Liberty Building & Loan as a Ponzi scheme. With most loans defaulting, Frost is accused of using new investor capital to make principal and interest payments to existing investors, thereby sustaining the fraud. The SEC further alleges that Frost misappropriated funds for personal use, including purchasing rare coins, paying off personal debt, and going on vacations.

Justin C. Jeffries, Associate Director of Enforcement for the SEC’s Atlanta Regional Office, warned potential investors about the dangers of high-return promises. "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. Unfortunately, we’ve seen this movie before – bad actors luring investors with promises of seemingly over-generous returns– and it does not end well."

In a statement, Frost admitted his involvement and wrongdoing in the scheme. He expressed his intention to cooperate with investigators and work towards repaying as much as possible to those he misled. "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."

The SEC's allegations highlight the risks associated with high-yield investment schemes and the importance of thorough due diligence by investors. The case serves as a cautionary tale for those considering investments that promise unusually high returns, as such promises often mask underlying fraudulent activities. The scheme's collapse underscores the need for vigilance and caution in the investment landscape, where the allure of high returns can often lead to significant financial losses for unsuspecting investors.