Attention Investors: Wolper Law Firm, P.A. is Investigating the First Liberty Building and Loan, LLC and Edwin Frost Alleged Ponzi Scheme

• July 16, 2025
• Bankers Life Securities
• Uncategorized

The Wolper Law Firm is investigating the alleged First Liberty Building and Loan, LLC (“First Liberty”) and Edwin Frost $140 million Ponzi Scheme.  On July 10, 2025, the Securities and Exchange Commission (“SEC”) filed an enforcement proceeding against First Liberty and Edwin Frost for alleged securities fraud. A copy of the Complaint is attached hereto:  https://www.sec.gov/files/litigation/complaints/2025/comp-pr-2025-98.pdf.

Upon information and belief, Edwin Frost and First Liberty utilized a network of registered and unregistered sales agents to sell promissory notes and loan participation agreements to retail securities investors.  The promissory notes and loan participation agreements were illusory in that the so-called investment returns were nothing more than capital raised from other investors—a classic Ponzi scheme.

The registered sales agents worked for FINRA member brokerage firms, which may be held financially responsible for the misconduct of their registered financial professionals.  The Wolper Law Firm has heard from clients of Bankers Life Securities who were recommended to invest in First Liberty through Financial Advisor Timothy Nathaniel Darnell aka Nathaniel Darnell.  Please contact the Wolper Law Firm for a free, confidential consultation, to determine if you have a potential claim for the recovery of your investment losses.

The Allegations Against First Liberty and Edwin Frost

According to the SEC, between 2014-2025, First Liberty and Edwin Frost raised $140 million from approximately 300 investors across the country by selling loan participation agreements and promissory notes that offered investment returns, ranging from 8% to 18%.  These loans were represented to be funding for “short term” bridge loans to small businesses with high interest rates.  In some instances, these loans were said to be backed by the Small Business Administration.

Initially, First Liberty and Edwin Frost limited the sale of the loan participation agreements and promissory notes to “friends and family.”  However, beginning in 2024, they engaged in general solicitation efforts to offer the investment opportunity to the public.  The SEC has alleged that Edwin Frost knowingly misrepresented the nature and success of the bridge loans and further represented that they had never experienced a default.  In reality, many of the bridge loans were in default, which compromised the asset pool that could be used to repay investors.

It is alleged that, by 2021, First Liberty was operating as a Ponzi scheme with approximately 80% of interest and principal payments to investors being made from new investor funds.  As additional bridge loans went it to default, the ability to legitimately repay investors was further compromised.  It is now believed that a significant portion of the $140 million raised has been completely lost.

If I am an Investor, What Avenues of Recovery do I have?

The Financial Industry Regulatory Authority (FINRA) and the SEC strictly prohibits financial advisors from “selling away” or selling securities and investments to clients that are not offered by the brokerage firm with which they are employed. It is not necessary that the financial advisor earn any compensation for recommending an outside investment.

FINRA Rule 3270, titled “Outside Business Activities of Registered Persons,” provides:

No registered person may be an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member. Passive investments and activities subject to the requirements of Rule 3280 shall be exempted from this requirement.

In addition, FINRA Rule 3280 provides:

No person associated with a member shall participate in any manner in a private securities transaction except in accordance with the requirements of this Rule.

Prior to participating in any private securities transaction, an associated person shall provide written notice to the member with which he is associated describing in detail the proposed transaction and the person’s proposed role therein and stating whether he has received or may receive selling compensation in connection with the transaction; provided however that, in the case of a series of related transactions in which no selling compensation has been or will be received, an associated person may provide a single written notice.

(c) Transactions for Compensation

(1) In the case of a transaction in which an associated person has received or may receive selling compensation, a member which has received notice pursuant to paragraph (b) shall advise the associated person in writing stating whether the member:

(A) approves the person’s participation in the proposed transaction; or

(B) disapproves the person’s participation in the proposed transaction.

(2) If the member approves a person’s participation in a transaction pursuant to paragraph (c)(1), the transaction shall be recorded on the books and records of the member and the member shall supervise the person’s participation in the transaction as if the transaction were executed on behalf of the member.

(3) If the member disapproves a person’s participation pursuant to paragraph (c)(1), the person shall not participate in the transaction in any manner, directly or indirectly.

(d) Transactions Not for Compensation

In the case of a transaction or a series of related transactions in which an associated person has not and will not receive any selling compensation, a member which has received notice pursuant to paragraph (b) shall provide the associated person prompt written acknowledgment of said notice and may, at its discretion, require the person to adhere to specified conditions in connection with his participation in the transaction.

The purpose behind this prohibition is to ensure that a financial advisor only offers to sell securities that have been vetted by his or her employer brokerage firm through a rigorous due diligence process. Most brokerage firms have an approved list of investments, products, and research that can be provided or made available to clients. Any deviation by the financial advisor from the approved product list may constitute selling away.

Upon information and belief, there are registered sales agents affiliated with FINRA member brokerage firms that sold the First Liberty promissory notes and loan agreements to retail securities investors.  FINRA and SEC rules require that brokerage firms adequately supervise their employees and ensure that they are complying with industry rules and regulations, as well as applicable law.  To the extent the brokerage firms failed to supervise, they can be held liable for damages caused by their agents’ misconduct.

The Wolper Law Firm has heard from clients of Bankers Life Securities, who were recommended to invest in First Liberty through Financial Advisor, Timothy Nathaniel Darnell aka Nathaniel Darnell.  Upon information and belief, Timothy Nathaniel Darnell aka Nathaniel Darnell recommended that clients of Bankers Life Securities liquidate securities positions at the brokerage and transfer funds to invest in First Liberty.  On August 14, 2025, it was reported by the Atlanta Journal Constitution that a subpoena was issued for Timothy Nathaniel Darnell aka Nathaniel Darnell by the Georgia Secretary of State, which is also investigating the First Liberty Ponzi scheme and its political connections.

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled more than 1,000 securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters.

If you have lost money in the alleged First Liberty Ponzi scheme, contact Matt Wolper for a free, confidential consultation, to determine your options for recovery.  We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.