International Law

Miami Man Gets 17 Years for Ponzi Scheme

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From the FBI Press Release on sentencing in the Bottom Line Ponzi.

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 that defendant Andres Leonel Pimstein, of Miami, FL, was sentenced today by U.S. District Judge Adalberto Jordan to 17 years' imprisonment, to be followed by 3 years of supervised release. Judge Jordan scheduled a hearing on June 12, 2009 to determine restitution.

From 2005 through 2008, Pimstein solicited friends, family, and other individuals in the United States 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.

He promised potential investors an annual return ranging from 18% to 36% to be paid in weekly, bi-weekly, or monthly installments, and marketed his familial ties to Ripley Corp.'s owners, thereby substantiating his promise of high-yield, short-term profits.

The venture, however, was a fraud.

As a result of the scheme, Pimstein, and those working at his direction, raised approximately $50,573,259.18 from 146 confirmed victims.

To date, these victim-investors have suffered an unreimbursed loss of principal of approximately $39,564,834.62.

During the fraud, Pimstein recruited investments into numerous corporate entities, including The Bottom Line of South Florida, Inc., and Summit Trading LLC.

During the scheme, Pimstein 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.

However, Pimstein's venture never made any profits because Pimstein never sold any electronics to Ripley Corp. in the way advertised to the investors.

Instead, in his effort to give the appearance of profits, Pimstein created, and caused to be created, false promissory notes and invoices to document the purchase and sale of various electronics.

As new investment capital came in the door, Pimstein re-directed the funds to the pool of other investors as returns, interest payments, and cash-out distributions to those investors who sought to withdraw their money. Pimstein also used the capital for personal items and expenses, including residential mortgage payments, automobile note payments, and child support.

In October 2008, the Miami Regional Office of the Securities and Exchange Commission filed a civil complaint against Pimstein, The Bottom Line of South Florida, Inc., and Summit Trading LLC in U.S. District Court.

In December 2008, by consent, the court entered orders enjoining Pimstein, The Bottom Line, and Summit from further violating the anti-fraud provisions of the federal securities laws, while leaving open the amount of disgorgement, prejudgment interest and civil money penalties.

Full post as published by Misleading Advertising Law on March 23, 2009 (boomark / email).