The owner of a Glendale-based ride-sharing business pleaded guilty in San Diego federal court Wednesday to wire fraud charges, admitting he illegally generated more than $13 million in profits by selling more than 30,000 Apple iPhones fraudulently obtained from Verizon Wireless at substantially discounted prices.
Kevin Galstian, 37, of Chatsworth, admitted that he committed the offense while on pretrial release in another case filed by prosecutors in San Diego. Galstian previously pleaded guilty in a bank fraud case in San Diego. He will be sentenced in both cases on Jan. 11.
A plea agreement calls for a 100-month sentence and for Galstian to pay $17 million in restitution to Verizon.
As part of the scheme involving the iPhones, Galstian admitted that he used his company, Toro Ride Inc., to induce Verizon Wireless to provide the business with more than 30,000 iPhones at a substantial discount, according to prosecutors.
Galstian purchased most of the mobile phones that usually sell for more than $500 for only 99 cents each, in connection with a two-year contract.
Galstian claimed the phones would be used by drivers for Toro Ride’s ride-sharing service — a service similar to Uber and Lyft — and that Toro Ride, which had only been operating in the Los Angeles area, was poised to expand nationwide, prosecutors said.
Galstian falsely told Verizon that Toro Ride had received $20 million from investors.
When he brokered the deal with Verizon last year, Galstian failed to disclose that he was awaiting sentencing on the bank fraud case and thus would be incarcerated and unavailable to lead the company in the expansion, according to prosecutors.
As Verizon provided the iPhones that supposedly would be used by Toro Ride’s drivers, Galstian sold the vast majority of the phones to companies engaged in the international re-sale of consumer electronics.
Thousands of the iPhones that Verizon shipped to Toro Ride were never used on its network and instead were activated in countries such as Vietnam, Iraq, China and Saudi Arabia.
Galstian fraudulently convinced Verizon to provide him with iPhones worth more than $19.4 million. In less than six months, Galstian generated illegal proceeds of more than $13 million by re-selling the iPhones, prosecutors said.
The defendant used about $2.5 million of the fraud proceeds to buy several properties, including a penthouse condominium in the Palms Casino in Las Vegas, and a Mercedes Benz S550.
— City News Service
