This is outright fraud. Best thing is usually to legally pressure the dude and get what you can out of him. Legal recourse for this amount of money is rarely worth it. Have you looked into small claims court?

An attorney shouldn't have a problem winning your case, but actually getting the money can be more difficult. (like if they spent it, and the money is really gone.) It's quite easy to throw good money after bad. Sometimes you gotta know when cut your losses and move on. Good Luck.