SEC Accuses Georgia Man of Ponzi Scheme

The U.S. Securities and Exchange Commission (SEC) has filed a complaint against Edwin Brant Frost IV, a Georgia resident, and his company, First Liberty Building & Loan, LLC. The SEC alleges that Frost operated the business as a Ponzi scheme. According to the complaint, Frost and his company raised at least $140 million from around 300 investors through loan participation agreements and promissory notes, promising annual returns ranging from 8% to 18%. The SEC claims that by 2021, approximately 80% of the interest and principal payments to investors were funded by new investor money rather than from legitimate business activities such as bridge loan interest payments or principal repayments.

Misuse of Investor Funds

The SEC’s complaint further details how Frost allegedly misused investor funds. It is reported that he spent over $570,000 on political donations, purchased a $20,800 watch, and made payments exceeding $2.4 million to credit cards linked to him and his business entities. These expenditures raise significant concerns about the integrity of Frost’s financial practices and the true nature of his business operations.

SEC’s Warning on High Returns

Justin C. Jeffries, associate director of enforcement for the SEC’s Atlanta regional office, emphasized the risks associated with promises of high investment returns. He warned potential investors to be cautious of offers that seem too good to be true, as they often signal fraudulent schemes. Jeffries noted that such deceptive practices have been seen before and typically result in negative outcomes for investors.

Frost’s Admission and Apology

In response to the allegations, Edwin Brant Frost IV has publicly accepted responsibility for his actions. Represented by lawyer Joshua Mayes of Robbins Alloy Belinfante Littlefield LLC, Frost issued a statement expressing remorse for misleading investors. He pledged to cooperate with federal authorities and the appointed receiver to address the financial damage caused. Frost also expressed a desire to personally apologize to those affected but cited restrictions preventing him from doing so.

Implications for Investors

This case highlights the importance of due diligence when considering investment opportunities. The SEC’s allegations against Frost serve as a reminder of the potential pitfalls in seeking high returns without thoroughly vetting investment offers. Investors are urged to remain vigilant and skeptical of promises that appear overly generous.