Georgia real estate asset manager invested $150,000 into massive Ponzi scheme

Butterfly Capital Group, a self-described strategic real estate investor, claimed in a lawsuit this week it had invested $150,000 in a $140 million Ponzi scheme that promised clients 18% returns and collapsed this month.

The Securities and Exchange Commission (SEC) on July 10 filed charges against Georgia-based First Liberty Building & Loan and its founder and owner Edwin Brant Frost IV in connection with a Ponzi that defrauded approximately 300 investors of at least $140 million.

Butterfly Capital’s principal, Manu Gupta, was introduced to Frost in March 2024 and started discussions of how to participate in a purported high-yield bridge loan linked to a Georgia medical practice, according to a lawsuit brought by the firm against First Liberty and Frost and filed Monday in Georgia state court.

According to the SEC, Frost allegedly misappropriated investor funds for personal use, including by using investor funds to make over $2.4 million in credit card payments, paying more than $335,000 to a rare coin dealer, and spending $230,000 on family vacations.

Butterfly Capital made two investments with First Liberty, $100,000 last March and $50,000 in May, just weeks before the scheme collapsed, according to the lawsuit.

Butterfly Capital is not a registered broker-dealer with the Financial Industry Regulatory Authority (FINRA) or a registered investment advisor, according to its website.

The firm’s investment into a purported fraud raised questions for one compliance executive.

“I would think that, if you were an experienced investor, hearing those kinds of guaranteed rates of return would raise a big red flag,” said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. “I can understand an unexperienced investor falling for this type of scheme.”

“But the questions is, how does an asset manager choose opportunities like this to invest in,” Ressler said. “What’s the due diligence?”

An attorney for Butterfly Capital, Kevin Epps, did not return a call on Wednesday to comment.

“By leveraging cutting-edge market insights and industry expertise, we identify and capitalize on lucrative investment opportunities while prioritizing transparency, integrity, and client satisfaction,” according to Butterfly Capital’s website.

The sudden collapse this summer of First Liberty Building & Loan “sent shock waves through Georgia’s political establishment,” according to a report this week in The Atlanta Journal-Constitution. “Frost IV and his relatives were prominent conservative activists with deep ties to the Georgia GOP and influential political figures.”

Butterfly Capital’s complaint includes a May 8 email from Frost promising a 12% return on a $50,000 investment in “First Liberty Notes” - financial instruments that claimed to offer pieces of short-term, high-yield business loans, according to the article.

The firm’s lawsuit seeks compensatory and punitive damages, a full accounting of investor funds, and an order barring Frost and his associates from launching similar ventures, according to the article.

“From approximately 2014 through June 2025, First Liberty and Frost offered and sold to retail investors promissory notes and loan participation agreements that offered returns of up to 18% by representing that investor funds would be used to make short-term bridge loans to businesses at relatively high interest rates,” according to the SEC’s complaint.

First Liberty & Frost “allegedly told investors that very few of these loans had defaulted and that they would be repaid by borrowers via Small Business Administration or other commercial loans,” the SEC alleged.

Since at least 2021, First Liberty operated as a Ponzi scheme by using new investor funds to make principal and interest payments to existing investors, according to the SEC’s complaint.