Each month, we publish a roundup of the most important SEC enforcement developments for busy in-house lawyers and compliance professionals. This month, we examine the following matters:
- An SEC complaint alleging a Georgia company and its owner operated a $140 million offering fraud and Ponzi scheme;
- An SEC insider trading case initiated following a post-transaction FINRA inquiry;
- The SEC’s voluntary dismissal of two enforcement actions;
- Remarks from SEC Chair Paul Atkins and Commissioner Hester Peirce regarding digital assets; and
- An SEC complaint alleging a Texas adviser defrauded investors of over $9 million.
1. SEC Charges Georgia Company and Its Owner with Operating $140 Million Offering Fraud and Ponzi Scheme
On July 10, 2025, the SEC charged First Liberty Building & Loan, LLC (“First Liberty”) and its founder Edwin Brant Frost IV with orchestrating a Ponzi scheme that defrauded approximately 300 investors of at least $140 million. The complaint alleges that, beginning in 2014, First Liberty and Frost offered for sale promissory notes with expected annual returns from 8% to 18% by funding short-term bridge loans to businesses at high interest rates. Though the offerings were originally limited to friends and family, First Liberty and Frost allegedly began publicly soliciting investors in 2024, including on radio shows and podcasts. According to the SEC’s complaint, few of these loans performed as expected, and since at least 2021, First Liberty and Frost have used new investor funds to pay returns to earlier investors. The complaint also alleges that Frost misappropriated investor funds for his personal use, including $335,000 paid to a rare coin dealer, $2.4 million used to cover his personal and business credit cards, $570,000 in political donations, and $5,000,000 in direct transfers to himself and family members.
Without admitting or denying the allegations, the defendants consented to a judgment granting the SEC’s requested asset freeze, receivership, and disgorgement, with monetary remedies to be determined at a later date. The SEC’s investigation remains ongoing. Following the SEC’s filing, Georgia Secretary of State Brad Raffensperger announced that his office’s Securities Division would launch a separate investigation into First Liberty and Frost. Raffensperger also called for all political entities to return any contributions from First Liberty, the Frost family, or their affiliates.
2. Former Animal Health Company Senior Director and Tippee Charged with Insider Trading Following FINRA Inquiry
Also on July 10, 2025, the SEC charged Trijya Vakil, a former senior director at Elanco Animal Health (“Elanco”), and her friend Neeraj Visen with insider trading. According to the SEC, Vakil shared with Visen material non-public information regarding Elanco’s impending acquisition of Kindred Biosciences (“Kindred”), leading both to purchase Kindred stock ahead of the public announcement. Vakil and Visen allegedly realized illicit gains of $2,447.50 and $109,437, respectively. The SEC’s complaint noted that Elanco’s insider trading policy prohibited employees from trading in the securities of another company if material, non-public information was obtained through the course of employment at Elanco. The SEC’s complaint further detailed that FINRA initiated an inquiry a few months after the Elanco/Kindred transaction. To respond to the FINRA inquiry, Elanco sent a list of individuals who had traded Kindred stock prior to the acquisition announcement to all personnel who had been involved in the transaction, including Vakil. Although the list included Visen’s name, Vakil responded that she knew no one on the list, and her false statement was incorporated into Elanco’s response to FINRA. According to the SEC, two years later, Vakil made false statements to the FBI when asked about her own trades in Kindred stock. Vakil also allegedly informed Visen that the FBI intended to record a call between them (Vakil and Visen) and asked Visen to corroborate the information she gave to the FBI.
Both individuals consented to judgments enjoining them from future violations of the securities laws, with monetary penalties to be determined by the court. Vakil and Visen also pleaded guilty to related charges brought by the U.S. Attorney’s Office for the Southern District of New York.
3. SEC Voluntarily Dismisses Two Pending Enforcement Actions
In July, the SEC voluntarily dismissed two significant enforcement actions, reflecting evolving policy considerations that may impact future regulatory activity.
On July 11, 2025, the SEC dropped its first-ever lawsuit alleging a violation of the 2016 mutual fund Liquidity Rule, which limits illiquid investments to 15% of a fund’s assets. The case, originally filed in 2023 against Pinnacle Advisors LLC, its officers, and fund trustees, was dismissed with prejudice after the defendants filed a renewed motion to dismiss. The motion relied in part on the Supreme Court’s landmark Loper Bright decision to argue that the SEC lacked authority to promulgate the Liquidity Rule. The SEC did not provide an explanation for the decision, but agreed in a joint stipulation to dismiss its case with prejudice in exchange for the defendants waiving attorneys’ fees and all claims against the Commission.
On July 15, 2025, the SEC agreed in a joint stipulation to dismiss its civil fraud suit against Gordon Coburn and Steven E. Schwartz, two former Cognizant Technology Solutions Corp. (“Cognizant”) executives. This decision followed the Department of Justice’s earlier dismissal of related criminal Foreign Corrupt Practices Act (“FCPA”) charges against the executives, in light of President Trump’s February 10, 2025, Executive Order pausing FCPA investigations and prosecutions. In its joint stipulation, the SEC stated that its decision was based on policy considerations, rather than an assessment of the merits of the case. The SEC had originally alleged in 2019 that the executives facilitated a $2 million bribe to an Indian government official. Cognizant previously agreed to pay the SEC $25 million to settle related FCPA charges.
Although these voluntary dismissals involve unrelated claims, they both underscore the SEC’s responsiveness to judicial developments and Executive Branch policy shifts. As the SEC’s enforcement priorities take shape under the second Trump administration, these dismissals are consistent with a more cautious approach to regulatory enforcement.
4. SEC Commissioners Weigh In on Digital Assets and Tokenized Securities
On July 9, 2025, Commissioner Hester Peirce released a statement confirming that “tokenized securities are still securities” within the purview of the federal securities laws. Peirce emphasized that while blockchain technology enables innovative models for distributing and trading securities in tokenized form, these innovations do not alter the fundamental nature of the underlying assets. Peirce urged all market participants to consider applicable disclosure and regulatory obligations and encouraged engagement with the SEC to discuss appropriate exemptions and rule modernizations necessitated by “unique aspects of a technology” or where existing regulations are “outdated or unnecessary.”
On July 30, 2025, the White House released a report titled “Strengthening American Leadership in Digital Financial Technology,” which is summarized in our recent client alert. In an address the next day at the America First Policy Institute, SEC Chair Paul Atkins discussed what he and Commissioner Peirce have dubbed “Project Crypto,” a Commission-wide initiative aimed at modernizing securities regulations to support President Trump’s vision of establishing the United States as the global leader in crypto asset markets. Drawing parallels to prior market transformations, Atkins emphasized the need for regulatory frameworks that foster innovation rather than impede it. The new initiative will focus on updating rules to accommodate blockchain‑related financial activity, provide clear guidance for determining whether a crypto asset is a security, and facilitate capital formation through purpose-fit disclosures and exemptions. Atkins also highlighted the importance of regulatory flexibility for custodians, trading venues, and “super-apps,” as well as the need to enable both intermediated and decentralized finance models within U.S. markets.
5. SEC Charges Adviser with $9 Million Fraud
On July 14, 2025, the SEC filed a complaint in the Western District of Texas against Imer Gomez (d/b/a K&G Investment Solutions, LLC), his entity Helios Venture Fund, LLC, and relief defendants Eric and Heather Claxton, alleging a scheme that defrauded their clients out of approximately $9 million. The SEC alleged that from August 2021 through September 2023, Gomez and his entities solicited clients by falsely claiming that Gomez was an experienced trader who could deliver monthly double-digit returns through active securities trading and that client accounts were insured for up to 75% of their value. According to the SEC, in reality, the defendants never used client funds to trade securities, created or supervised any client accounts, or obtained insurance for client accounts. To conceal this fraud, Gomez allegedly sent clients fictitious account statements showing fabricated gains on their accounts. According to the SEC, Gomez primarily offered these investment advisory services to Hispanic clients, claiming that he wanted to help the Hispanic community build generational wealth. The SEC’s complaint alleged that Gomez and Helios instead misappropriated client funds to sustain Gomez’s lifestyle, make Ponzi payments to other clients, and fund unrelated business ventures. Gomez also allegedly transferred approximately $666,000 of client funds to the relief defendants, who used those funds to purchase real estate.
The SEC’s complaint seeks permanent injunctive relief and disgorgement against all defendants and conduct-based injunctions and a civil penalty against Gomez.
