International Law

Florida Ponzi Scheme

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R. Alexander Acosta, United States Attorney for the Southern District of Florida, and Jonathan I. Solomon, Special Agent in Charge, Federal Bureau of Investigation (FBI), announced today's filing of an Information charging defendant Andres Leonel Pimstein, 48, of Miami-Dade County, with wire fraud in connection with the operation of a multi-million dollar "Ponzi" scheme, in violation of Title 18, United States Code, Section 1343.

The case will be heard before United States District Judge Adalberto Jordan. Pimstein is scheduled to make his initial appearance before a United States Magistrate Judge on November 12, 2008. If convicted, Pimstein faces a maximum term of imprisonment of 20 years and a $250,000 fine.

According to the Information filed in court, from approximately March 2005 through early 2008, Pimstein solicited individuals to invest in a business venture involving the purported sale of consumer electronics, - namely, the Apple iPod®- to Ripley Corp. S.A., a department store chain based in Chile.

Pimstein told investors that he planned to wholesale-purchase the iPod® and other electronics and sell them to Ripley at above-market rates. Pimstein promised investors annual returns ranging from 18% to 36% to be paid in monthly installments.

Pimstein solicited investors into numerous corporations created for operating the scheme, including The Bottom Line of South Florida, Inc., and Summit Trading LLC.

During the scheme, Pimstein is alleged to have offered some of the investors the opportunity to earn additional proceeds by recruiting new investors. In exchange for a commission fee, these investors formed independent corporate entities from which to solicit and receive new investor funds.

To execute the scheme, Pimstein allegedly created false invoices to document the purported purchase and sale of various consumer electronics.

In fact, however, he did not purchase anything for subsequent sale for profit to Ripley or anyone else.

Instead, Pimstein used the investment capital he received from some investors, intended for product purchases, to pay monthly returns, "interest payments," and distributions to other investors who sought to withdraw their money.

This is called a "Ponzi" scheme. Pimstein also used the investment capital her received for how own personal expenses, including residential mortgage payments, automobile note payments, and child support.

As a result of the scheme, Pimstein raised at least $30 million. At least 85 of the scheme's investors lost more than a total of $20 million in investment capital.

In addition to the criminal charges, the Miami Regional Office of the Securities and Exchange Commission today filed a civil complaint in the United States District Court against Pimstein, The Bottom Line of South Florida, Inc., and Summit Trading LLC in connection with the "Ponzi" scheme described above. The SEC complaint seeks permanent injunctions, an accounting, disgorgement, and civil penalties.

Full post as published by Misleading Advertising Law on October 30, 2008 (boomark / email).