First Liberty Building & Loan Ponzi Scheme Case: The Loans Stopped Paying but the Investor Checks Kept Coming

The Securities and Exchange Commission alleged that First Liberty Building & Loan, a Georgia lender, raised at least $140 million from approximately 300 investors in a Ponzi scheme that used new investor money to keep earlier investors paid. The company sold participation agreements and promissory notes to finance short-term business loans. For someone who handled the loan files or monthly payments, the central question is concrete: did the money reaching investors come from borrowers, or from the next people buying in?

The SEC’s complaint against the Newnan-based company covers fundraising from 2014 through June 2025. This page follows the loans, the promised investor protections and the transfers behind this alleged Ponzi scheme. Our page on private note and loan Ponzi schemes compares the same payment problem across other offerings.

What First Liberty Promised Its Investors

First Liberty offered a bridge between a small business’s immediate need for cash and the longer-term financing expected to repay it. According to the SEC’s complaint, the company told investors that borrowers would repay their bridge loans through Small Business Administration or other commercial loans that First Liberty would help arrange. The promised source of the investor’s return was the borrower’s repayment and interest.

The early offering went to friends and family, who participated in particular loans. The complaint describes investors receiving a proposed loan amount, closing and maturity dates, information about the borrower, the use of the money and the expected way out of the loan. Their funds were pooled to finance that particular borrower.

In 2024, the Securities and Exchange Commission alleged, First Liberty expanded its solicitation through radio advertisements, internet programs and its website. The publicly offered notes pooled investor money without tying an investor to a specific loan. For someone who worked on the investor ledger, the note no longer identified which borrower was supposed to fund the payment.

The complaint describes the early agreements as offering returns between 14 and 18 percent, compared with 8% to 13% for the public notes, whose rates increased with investment size. Both programs generally had a 12-month term, could roll over and paid interest monthly. First Liberty’s compensation was supposed to come from borrower fees and, later, the difference between the interest borrowers paid and the interest investors received.

SBA Approval Was Part of the Sales Pitch

The Securities and Exchange Commission alleged that the owner told investors borrowers had already received SBA loan approval and needed bridge financing only while that process finished. According to the complaint, few, if any, borrowers had received preapproval when their bridge loans were funded, and the owner knew few bridge loans ever became SBA loans. For a lending employee, the approval file and the promised refinancing are part of the same story as the bank account: they show whether the expected source of repayment existed.

How Exactly Does a Ponzi Scheme Work?

A Ponzi scheme pays earlier investors with later investors’ money while presenting the payments as proceeds of the investment. In First Liberty’s case, the SEC alleged that some bridge loans were made, but most ultimately defaulted and stopped paying interest. First Liberty kept paying investors anyway.

The complaint puts a number on that substitution: as of 2021, approximately 80% of principal and interest payments to investors allegedly came from new investor funds. The owner allegedly told prospective investors that only one, or very few, loans had gone bad. In its July 2025 complaint, the commission alleged that potentially 90% of the bridge loans were in default. We see the absurdity in that sales pitch: the investors’ checks were doing the work of a healthy loan book.

The complaint puts First Liberty’s typical interest spread in the friends-and-family program at 2%. Even the best-case interest income was tight. The SEC calculated that, at the end of 2019, First Liberty could generate approximately $180,000 from its interest spread if every outstanding loan paid, while that year’s credit-card expenses alone were $118,000. By 2021, according to the complaint, payroll exceeded maximum interest revenue before credit-card expenses were counted. Defaults then made the gap worse.

A Bankrupt Borrower, an Investor Still Getting Paid

The complaint follows an investor who put $500,000 into a $3.4 million bridge loan in 2019. When that loan matured without repaying the investor, First Liberty made further loans to the borrower. The SEC alleged that the borrower entered bankruptcy in August 2022 and stopped paying interest, yet First Liberty purportedly made another loan to it that December.

In May 2024, the owner asked the same investor to put money into a healthcare-app venture. The investor asked about repayment of the earlier investment. According to the SEC, the owner said the original loan would pay off in June and offered this reassurance about the borrower:

The SEC alleged that the owner already knew about the bankruptcy and that the investor relied on these representations to make a new $200,000 investment. First Liberty’s bankruptcy claim did not even include the original loan. Yet the investor continued receiving monthly interest on that investment until First Liberty closed in June 2025.

Default Notices and Consent Rights That Stayed on Paper

The loan participation agreements promised investors notice of financial changes that could materially affect payments or repayment. They also required investor consent before First Liberty made additional loans to the same borrower. These were specific promises an employee could compare with the company’s notices, communications and subsequent advances.

The Securities and Exchange Commission alleged that First Liberty failed to notify investors of known borrower defaults and failed to obtain consent for additional lending. It also alleged that, by at least 2021, the company was issuing agreements containing those provisions while knowing it did not intend to honor them. In the SEC’s account, the protections remained in the agreement while the decisions they were supposed to govern happened elsewhere.

Where the SEC Said Investor Money Went

The Securities and Exchange Commission alleged that the owner transferred more than $5 million of investor money to himself and family members. It separately described over $2.4 million in payments to credit cards issued to him and his business entities and over $230,000 for a family vacation rental in Maine. The SEC’s account puts those payments beside the promise that investor funds would finance bridge loans.

The complaint also traced transfers to affiliated entities. First Liberty Capital Partners signed most of the participation agreements and promissory notes, while The Liberty Group allegedly received $8.3 million of investor funds. For an insider, the company on the agreement, the account receiving a deposit and the entity ultimately receiving a transfer can be different parts of the same transaction.

The SEC paired a repayment assurance with a dated bank balance. It alleged that, in June 2025, the owner solicited investments in a $3.5 million loan while claiming First Liberty had enough cash flow and resources to repay it if necessary. The complaint put the May 30 account balance at $2,668,045. The assurance was larger than the account.

The SEC Relief and the Separate Criminal Charge

The Securities and Exchange Commission’s July 22, 2025 account of the civil action says the Northern District of Georgia froze assets. The court also ordered a receiver and accounting for the entities behind the offering.

In its April 23, 2026 announcement of the criminal charge, the Justice Department said First Liberty’s former president faced a wire-fraud charge. Its account of the charges and information presented in court alleged that he concealed borrower defaults while continuing to finance at least one defaulted borrower. The announcement identified the FBI and the Federal Deposit Insurance Corporation Office of Inspector General as investigators, with substantial assistance from the SEC and the Georgia Secretary of State’s office.

What Are the Red Flags of a Ponzi Scheme?

In the First Liberty allegations, the revealing discrepancies were monthly investor payments after borrowers stopped paying, assurances of rare defaults beside a troubled loan book, and new advances without the promised investor consent. For someone in loan servicing, accounting or investor relations, those discrepancies may sit in separate systems. We connect the agreements, borrower records and movement of money so the sales story can be tested against what the business actually did.

A parallel appears in the SEC’s 2017 allegations against Woodbridge. Investors supposedly earned returns from loans to independent borrowers, but the SEC alleged that most borrowers were controlled by Woodbridge’s owner and lacked the income to pay. New investor money funded payments to earlier investors, according to the SEC. In both accounts, the borrower’s identity and ability to pay mattered as much as the regular arrival of an investor’s check.

Insider information has a measurable place in fraud detection. In The Significance of Whistleblowing as an Anti-Fraud Measure, published in the Journal of Forensic & Investigative Accounting in 2018, whistleblowing accounted for 35.9% of detections in the study’s occupational-fraud sample, compared with 21.4% for internal controls.

For securities fraud, eligible whistleblowers can share 10% to 30% of qualifying sanctions collected when the SEC action exceeds $1 million in monetary sanctions. A separate whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers for fraud against government money. We work with you to identify the case your information supports and the award opportunity attached to that evidence.

You Know What Funded the Payment

If you handled loan defaults, investor payments or transfers that did not match the offering, speak with our whistleblower experts about what you saw. We build the case around your knowledge of the business and bring in securities fraud whistleblower lawyers who understand private lending and investor-fund tracing. We stay beside you as that inside view becomes evidence the authorities can act on.