First Liberty Building & Loan Ponzi Scheme Lawsuit
The U.S. Securities and Exchange Commission reportedly sued First Liberty Building & Loan, LLC and its founder, in July 2025, alleging the Newnan, Georgia lender ran a $140 million Ponzi scheme that defrauded roughly 300 investors. The founder has since pleaded guilty to federal wire fraud. There appears to be a question of how First Liberty investments reached retail investors in the first place: state regulators have now taken action against more than one individual with a securities industry background for allegedly selling First Liberty promissory notes to clients, and Georgia’s Secretary of State has publicly asked other firms connected to the scheme to come forward. Investors who purchased First Liberty investments through a broker or investment adviser may want to speak with a FINRA arbitration attorney about their options.
The SEC’s Lawsuit Against First Liberty
According to the SEC’s litigation release, the agency filed an emergency enforcement action on July 10, 2025 in the U.S. District Court for the Northern District of Georgia, accusing First Liberty and its founder of violating federal securities fraud provisions. The complaint alleges that between approximately 2014 and June 2025, First Liberty raised at least $140 million from about 300 investors by selling promissory notes and loan participation agreements advertised as low-risk bridge loans to small businesses, paying annual returns of 8% to 18%. The SEC alleges that since around 2021, First Liberty used new investor money to pay returns to earlier investors — the defining feature of a Ponzi scheme — while its founder allegedly diverted investor funds toward personal expenses, including more than $2.4 million in credit card payments, over $335,000 to a rare coin dealer, and roughly $230,000 in family vacations. The court granted the SEC’s requested emergency relief the following day, freezing First Liberty’s assets.
First Liberty’s founder reportedly pleaded guilty in May 2026 to a single count of felony wire fraud, according to news coverage of the case. That charge carries a maximum sentence of 20 years; prosecutors have reportedly recommended 14 years, with sentencing scheduled for late August 2026. These figures on the plea and sentencing come from trade and local news reporting rather than a court filing, and are subject to change before sentencing.
Registered Brokers May Have Sold First Liberty Investments to Clients
First Liberty did not sell its promissory notes directly to every investor. According to regulators, the company relied on a network of sales agents — some registered with FINRA member firms as brokers or investment adviser representatives, others unregistered — to bring in retail investors. That distinction matters for investors evaluating their recovery options, because a currently registered broker who sells an unapproved, outside investment to clients may expose both himself and his brokerage firm to liability for selling away.
Two examples illustrate how this has played out so far. Timothy Nathaniel Darnell, a Bankers Life Securities representative in Atlanta, was reportedly discharged by the firm in September 2025 and later fined $500,000 by the Georgia Secretary of State’s office, which alleges he sold First Liberty investments to nearly four dozen clients without his firm’s knowledge. Bankers Life Advisory Services and Bankers Life Securities subsequently agreed to repay approximately $6.7 million to 46 affected investors. Read our full coverage of the Timothy Darnell Bankers Life Securities complaints for more detail on the FINRA arbitration claims filed against him.
Separately, Georgia regulators reportedly fined Fayette County Board of Education member Randall “Randy” Hough $500,000 in March 2026, alleging he sold roughly $6.9 million in First Liberty investments to at least eleven clients while working as a First Liberty “development officer.” Hough had reportedly spent decades as a registered broker-dealer agent, including a stint at A.G. Edwards & Sons, Inc., before his role at First Liberty, though regulators allege he was not registered as a securities agent or licensed to give investment advice at the time he sold these particular investments.
Georgia’s Secretary of State, Brad Raffensperger, has said publicly that his office has heard from only about half of the victims it suspects are out there, and has urged “other firms connected to First Liberty” to follow Bankers Life’s example. More than 150 people have reportedly submitted complaints to his office. If you worked with a broker or investment adviser representative — at Bankers Life Securities or elsewhere — who recommended First Liberty Building & Loan promissory notes or loan participation agreements, it may be worth having your account reviewed even if that broker has not yet been named publicly.
Receivership, Investor Losses, and the Path to Recovery
A court-appointed receiver, S. Gregory Hays, is separately working to recover money for First Liberty investors. According to news reporting on a recent receiver filing, First Liberty entities raised approximately $155.7 million from investors and paid back about $89.4 million, leaving a shortfall of roughly $66 million. The receiver has proposed using a “rising tide” method to distribute recovered funds and has pursued asset sales, including a court-ordered auction of vehicles tied to the case, to build the pool of money available to investors. Investors can find updates on the receivership process at firstlibertyreceivership.com, according to news reports.
Recovery through the receivership is separate from, and can be pursued alongside, a FINRA arbitration claim against a broker or brokerage firm that sold First Liberty investments. The receivership addresses First Liberty’s own remaining assets; a FINRA claim addresses whether a broker or firm failed to supervise a representative’s outside sales activity.
Do You Have a Claim If You Invested in First Liberty?
Brokerage firms are required to supervise their registered representatives’ outside business activities and private securities transactions. When a firm fails to detect a broker selling away — recommending an investment that was never vetted, approved, or disclosed to the firm — the firm may share responsibility for the resulting losses alongside the individual broker. If you invested in First Liberty Building & Loan promissory notes or loan participation agreements through a financial advisor, you may want to have your account reviewed by an attorney experienced in FINRA arbitration, regardless of whether your broker has been named in press coverage of this case.
Frequently Asked Questions
Is there a lawsuit against First Liberty Building & Loan?
Yes. The SEC filed an emergency civil lawsuit against First Liberty and founder in July 2025, and the court froze the company’s assets. The company’s founder has since pleaded guilty to a federal criminal charge. Investors may also have separate claims against the brokers or investment advisers who recommended First Liberty investments to them, which are generally pursued through FINRA arbitration rather than the SEC’s case.
Was my broker required to tell their firm about First Liberty investments?
If your broker was registered with a FINRA member firm, yes. FINRA rules generally require brokers to provide written notice to their firm before participating in or recommending private securities transactions conducted away from the firm’s approved platform, so the firm can review and supervise the activity. Selling an outside investment like a First Liberty promissory note without that disclosure is commonly referred to as selling away.
What should I do if I invested in First Liberty through a financial advisor?
Gather your account statements, any promissory note or loan participation documents, and records of your communications with the advisor who recommended the investment. An attorney experienced in FINRA arbitration can help you evaluate whether you have a claim against the broker, the brokerage firm, or both, separate from any recovery you might see through the court-appointed receiver.
Have You Lost Money Investing With First Liberty Building & Loan?
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago and Seattle. If you invested in First Liberty Building & Loan through a broker or investment adviser and suffered losses, contact us for a free consultation at (888) 637-5510 or visit our contact page. You can also read more about the FINRA arbitration process on our FINRA arbitration attorney page.
