iPonzi scheme nets perpetrator 17 years

Jake Widman
Tuesday, 24 March 2009 07:27

Your IT - Mobility

A Miami businessman spent the last 3 years running an iPod-based Ponzi scheme on the University of Miami campus. Now he’ll spend the next 17 years behind bars.

The basis of Andres Pimstein’s scam was a plan to buy iPods at wholesale prices in the U.S. and then resell them at inflated prices to the Ripley department store chain in Pimstein’s native Chile. He promised investors in the scheme a return of 18 to 36 percent.

Instead, Pimstein made up false invoices demonstrating the sales but kept his investors’ money, using the funds from new investors to pay off the older ones -- a classic Ponzi scheme. He also recruited agents, who were unaware of the scam, to round up more investors. According to the criminal charges, "Pimstein made 'interest payments' to the agents that were purportedly derived from the sale of products to Ripley. The agents, in turn, distributed a percentage of the 'interest payments' to their investors and retained the difference as a commission."

But Pimstein ran out of capital last April, and in December pled guilty to 12 counts of wire fraud. In addition to his 17-year prison sentence, he must also return more than 5,000 iPods and turn over an investment account totaling nearly $140,000.

Pimstein's sentence comes less than a week after news of another iPod fraud , that one based on phony warranty replacements.