The U.S. Securities and Exchange Commission (SEC) has sued Daniel Pacheco, the founder of IPro for offering unregistered securities and operating a $26 million fraudulent pyramid scheme. The regulator also alleges that Pacheco had mismanaged investors’ funds which have led to his company’s inability to pay commissions and bonuses entitled to investors, according to the SEC’s press release on May 23, 2019.
The SEC Files Civil Injunctive Action Against Daniel Pacheco
Per the press, the SEC has filed a civil injunctive action against Daniel Pacheco, a 45-year-old California resident. The defendant allegedly sold unregistered securities to investors between January 2017 and March 2018 and over $26.5 million was raised through the sale.
While revealing the dealings of the pyramid scheme, the SEC stated that Pacheco had sold “IPro Packages” to investors through two California-based companies he owns and these are IPro Solutions LLC and IPro Network LLC. The IPro Packages were made up of e-commerce lessons on how to earn from an online store.
Furthermore, investors were given points which could be converted into a cryptocurrency called, PRO Currency. Those who contributed more were introduced into a recruitment-based compensation plan. In this case, they could earn a combination of cash commissions and convertible points by bringing in new members into the IPro network.
Investors could also opt to pay an additional $50 annual activation fee in order to become a premium independent sales associates. Pacheco also led them to believe that that PRO Currency will be used for e-commerce trade which could potentially spike the price of the virtual asset.
SEC Says IPro instructional packages Are Unregistered Securities
The SEC, on the other hand, outlined that the IPro instructional packages are actually unregistered securities because they involved investing in a pyramid scheme. Moreover, clients were offered sold digital assets that need to be registered with the SEC unless they are exempted from registration.
Asides from offering these unregistered securities, Pacheco allegedly squandered investors’ funds which have led to the collapse of the pyramid scheme. First, he bought a $2.5 million luxury house in Redland California, a Rolls Royce valued at $150,000, amongst other things.
The defendant purportedly invested $1.9 million in Accept Success Corporation, a company owned by his daughter but managed him. Pacheco also invested $2 million in an E Profit Systems LLC, limited liability company which is also controlled by him.
According to the SEC, these fraudulent expenses helped to accelerate the crash of the scheme and it made Pacheco’s company unable to pay the commission and bonuses which its investors were entitled to. Prior to this time, the company had outlined that investors could earn as between 58 and 65 percent of all its income from the firm’s packages.
While making comments, Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office said:
“We allege that Pacheco hid an old fraud under the guise of cutting-edge technology. He enticed investors by offering them the opportunity to speculate in cryptocurrency, when in fact he was simply operating a pyramid scheme.”
CoinMarketCap’s Pro Currency Features the Same Logo as PRO Currency
PRO currency, on the other hand, the virtual asset in question on being searched on Coinmarketcap’s platform, shows a similarity to the asset “ProCurrency”. The latter can be attributed to the same logo it has in comparison to that of an IPro YouTube Video which shows people how to send Pro Currency from an iPro Network account.
A crackdown of this nature is not the first of its kind from the SEC given that Alex Tapscott, founder of NextBlock Global, an investment firm was fined for unregistered securities. Tapscott has been ordered to pay a $25,000 penalty and he has been issued a cease-and-desist order that will stop him and his firm from further issuing these securities.
It can also be recalled that on November 8, 2018, Zachary Coburn, EtherDelta’s CEO was fined for operating an unregistered securities exchange. Zachary Coburn, at that time, had agreed to comply with the SEC’s terms and pay the $300,000 in unlawful profits, $13,000 in prejudgment interest, and a $75,000 penalty.