Securities authorities in Idaho have accused real estate professional Nathan Pyles of of running a Ponzi scheme that stole “at least $4.9 million” from “dozens” of investors, according to a report by the Idaho Statesman.
As president of Shiloh Management Services, Mr. Pyles allegedly overpaid himself, directed funds from new investors to repay old investors, failed to record property deeds, filed multiple deeds on certain properties, and diverted investor funds to personal expenses, according to the Idaho Finance Department, which also alleges that one of his investors helped Mr. Pyles recruit new investors, for which he received commissions. The Statesman notes that these activities “would require them to register as securities agents,” however, “neither one was registered.”
Mr. Pyles and the other individual allegedly made false representations about Shiloh Management Services’ investments and failed to disclose material facts regarding such. Mr. Pyles allegedly bought, repaired, and resoled old houses, and later purchased “underdeveloped properties and built houses on them,” funding construction by soliciting investors to purchase short-term notes that promised interest between 10% and 30%. According to the Idaho Finance Department “Most investors were offered between 14 and 17 percent interest for notes that matured in six months,” and he solicited at least 55 investors to contribute at least $28.8 million for his activities.
According to the Statesman’s report, Shiloh was founded in March 2008, and in its first several years Mr. Pyles “made monthly interest payments on time to investors and sometimes made the payments early,” repaying principal investments after he sold the properties in question. He represented to investors that “the investments were safe because he only invested in projects where the amount borrowed was less than the value of the property itself,” according to the Statesman, meaning that if the development projects slowed or failed, he could resell the land and repay his investors.
However, according to the Statesman, the Finance Department alleges that even though his projects “were profitable, eventually the returns weren’t enough to cover his expenses.” He allegedly “listed his gross income as $250,000” in a 2016 credit application, and stated that he paid personal expenses using Shiloh’s bank account, totaling “at least $386,724 between January 2014 and January 2017, two months before 10 investors mostly from Southern Idaho forced him into an involuntary bankruptcy.” He allegedly took loans from commercial lenders to perpetuate the scheme, borrowing “at least $6.8 million from at least 30” entities. According to the Finance Department’s complaint, Mr. Pyles represented himself as a “God-fearing Christian” so as to create a sense of security among his investors. “These victims tended to trust Pyles more because they believed his religion made him more trustworthy,” according to the complaint.
The Idaho Finance Department is seeking to recover allegedly ill-gotten funds in the pending complaint.