FTC Busts DVD Rental Machine Scam
The FTC's law enforcement action against American Entertainment Distributors, Inc., was filed in 2005 and named 10 defendants. The U.S. District Court for the Southern District of Florida has entered final orders against nine of them, assessing fines to refund their victims.The defendants tricked investors into plunking down $28,000 to $37,500 apiece for video rental vending machines, according to FTC allegations. The scammers promised returns of $60,000 and $80,000 a year, and told victims they could recoup their initial investment in six to 14 months.
The FTC's case was on hold for three years while the Department of Justice pursued parallel criminal proceedings. The U.S. District Court for the Southern District of Florida has entered a permanent injunction against one defendant, approved settlements with five defendants, and entered default judgments against three other defendants.
- The court entered a permanent injunction against Russell G. MacArthur in July 2009. He is serving time in federal prison on related criminal charges.
- The court approved a settlement with defendant Miriam Andreoni in November 2010. The order includes a judgment of $19.2 million, the total amount American Entertainment Distributors took from consumers.
- The court approved a settlement in November 2010 with defendants Mauricio Paz and the now-defunct Universal Cybercom Corporation, which also includes a $19.2 million judgment.
- The court approved a settlement in November 2010 with two other defunct corporations, Automated Entertainment Dispensers, Inc., and Universal Technical Support, Inc.
- The court entered default judgments in February 2005 against defendants James MacArthur, American Entertainment Distributors, Inc. and American Entertainment Machines, Inc. More than $330,000 in assets have been recovered from these defendants. James MacArthur is serving time in federal prison on related criminal charges.
The FTC's case against the American Entertainment Distributors defendants was part of "Project Biz Opp Flop," a 2005 FTC crackdown targeting business opportunity scams. The sweep included 16 FTC actions against more than 60 individual and corporate defendants who were charged with business opportunity and work-at-home fraud.
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