updated 07:50 pm EDT, Mon March 23, 2009
iPod ponzi scheme
Within days of an arrest involving 9,000 fraudulently obtained iPods, a second iPod-related scam has surfaced, according to the Miami Herald. A Miami-based businessman, Andres Leonel Pimstein, has been sentenced for running a $50 million investment scam at the University of Miami campus dating back to 2005. Pimstein pleaded guilty to a number of wire-fraud charges late last year, leading to a 17-year prison sentence. He must also surrender over 5,000 iPods and an investment account worth over $138,000.
In a similar fashion to the recent Madoff scandal, Pimstein orchestrated a Ponzi scheme that promised investors annual returns of up to 36 percent. The facade involved wholesale purchases of iPods that were allegedly sold to a retail chain in Chile at rates higher than the standard market values.
Initial investors were not paid with profits from the sales, however, but with money deposited from new investors. Pimstein even recruited agents that would earn more by encouraging more investors to buy into the idea.
"In exchange for their work, Pimstein made 'interest payments' to the agents that were purportedly derived from the sale of products to Ripley," the prosecutors claim. "The agents, in turn, distributed a percentage of the 'interest payments' to their investors and retained the difference as a commission."
Prosecutors claim that 146 of the duped investors ended up losing a total of approximately $40 million. [via Macworld]