The SEC has announced charges against Edwin Brant Frost IV and First Liberty Building & Loan, LLC, accusing them of orchestrating a Ponzi-like investment fraud scheme.
Frost consented to the SEC’s requests for relief and agreed to an asset freeze, a security industry ban, and to pay back the misappropriated funds with interest and fines. The DOJ has not announced whether it will pursue criminal charges.
According to the SEC’s complaint, between 2014 to June 2025, Frost raised $140m from approximately 300 investors, with promises that the investments would be used to fund short-term, high-interest “bridge loans” for small businesses.
Frost promised that those loans would generate steep returns between 8% and 18% annually.
But while Frost promised investors that only one loan had ever defaulted, the truth was that a significant majority ultimately went sour. And in classic Ponzi fashion, Frost allegedly ended up paying earlier investors with contributions from later ones to cover up the losses.
By 2021, 80% of investor payments were made using funds from new investors.
A bridge too far
Throughout the scheme, Frost allegedly transferred $5m of the ill-gotten proceeds to himself and his family, and millions more to entities he controlled.
Frost, who is a prominent Georgia state Republican, was able to facilitate those investments in part due to his influential political and religious organizational connections, according to the Associated Press.
And $570,000 of the money he illicitly received from investors was used to finance political causes, including the candidacy of right-wing politicians in the state. Georgia Secretary of State Brad Raffensperger is now demanding that those funds be returned.
Frost issued a public apology the day after the SEC’s complaint was published.
“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,” Frost said.
Enticing small-scale investors with promises of high returns through bridge loans has become a relatively common investment scheme, where suspiciously steep returns in short timeframes are often explained by urgent lending needs of small businesses or property developers.
In 2024, the SEC filed a lawsuit against Georgia-based Drive Planning, accusing the firm of running a Ponzi scheme by luring investors with promises of high returns through bridge loan opportunities.
Rule violations:
The SEC charged Frost and his firm with violating:
- Section 17(a) of the Securities Act (covering fraud in the offer or sale of securities).
- Section 10(b) and Rule 10b-5 of the Securities Exchange Act (covering fraud in connection with purchase or sale of securities).
