This is actually advice I've come to find useful 
in almost every situation you could ever find 
yourself in...but I'm biased ^_^

In this situation, you have your choice of two 
different actions; one for fraud or one for 
breach of contract. In the first transaction he 
could be liable for fraud (but we haven't gotten 
to fraud yet in Torts so I'm not even going to 
try to explain that one). 

Since you two made a subsequent oral agreement, 
though, it could be a contract depending on the 
language used and whether or not your promise to 
keep quiet about the mishap is what prompted his 
promise to give you your money back.

In any event, nothing lights a fire under 
someone like a letter written on legal 
letterhead! (Depending on how many lawyer 
friends you have or how much he's taken from 
you).  You could always write him and give him 
one last chance to give you your money back, 
THEN advise him that you are considering legal 
action and you will go public with the details.  
It sounds to me like he's just stringing you 
along.