First Liberty investigation updates: the asset auction and Bay Point’s controversial motion

S. Gregory Hayes, the court-appointed Receiver overseeing the First Liberty Building and Loan and Edwin Brant Frost IV investigation, filed a request on Sept. 25 to auction off assets associated with the defendants. The motion follows an ongoing investigation by the Securities and Exchange Commission (SEC) into allegations of fraudulent operations and a Ponzi scheme at First Liberty, a Newnan-based non-bank lending firm.

The Receiver has proposed attaining Bullseye Auction & Appraisal LLC to inspect and auction off for the benefit of the Receivership Estate. According to the Receiver’s report, Bullseye is bonding in the amount of $100,000 and is “well-equipped to represent the Receiver as auctioneer in the liquidation of the Receivership Assets.”

Assets currently under the Receiver’s control include:

• First Liberty’s Newnan Office at 14 Greenville St, Newnan, GA 30263
• 2006 Aston Martin DB5
• 2011 LNDR Range Rover Sport
• 2011 Range Rover Sport
• 2017 LNDR Range Rover Sport
• 2013 Nissan Rogue
• Other personal property in the custody of Defendant Frost or his family

If approved, Bullseye will collect:

• 10% of the sale price of the automobiles and other personal property 
• a $1,000 reimbursement per vehicle auctioned off
• For real estate, a 4% commission and reimbursement for any out-of-pocket marketing expenses not to exceed $1,000. 

The Newnan office is subject to an outstanding $165,000 note owed to Kathy Bates, with the possibility of additional liens on other properties. Bates is therefore in line to be repaid from the sale of that property.

Under the proposed arrangement, proceeds from each asset sold would first go to the auctioneer’s costs, then valid liens attached to that specific property and then any additional proceeds would remain in the Receiver’s possession pending further action from the Court.

Following the Receiver’s motion to auction the assets, a separate development arose on Sept. 30, when Bay Point Capital, a private real estate investment firm, filed a motion to intervene in the Receivership.

Bay Point seeks to assume control over the administration and collection of the three loans they invested into First Liberty: a Cancer Care Loan (CCL), Full Circle Loan and Stone Capital Loan (SC1). 

However, the Receiver strongly opposes this motion. According to the Receiver’s report,  relinquishing control to Bay Point over their investments in First Liberty would harm other investors and disrupt the process of the investigation.

Given that part of First Liberty’s fraudulent activities involved mixed investors’ funds for their personal benefit, the Receiver stated that Bay Point’s funds would not be easily identifiable. Additionally, Bay Point is involved with partial interests, meaning some of their funds are a part of loans shared by multiple investors.

While Bay Point may identify themselves as one of the major firms affected by First Liberty’s Ponzi scheme, the Receiver believes granting them this permission would be putting their needs above the needs of other investors who were also negatively impacted by First Liberty. Due to Bay Point being a larger hedge fund, they have more capital to put into these efforts than other investors defrauded by First Liberty would, given that many investors lost their life savings from investing in First Liberty. This would also blur the lines of loan enforcement and recovery, potentially causing confusion over the collective process as a whole.

Therefore, the Receiver is asking the Court to deny Bay Point’s motion to intervene for the sake of the overall investigation and all investors involved.