California-based IPro Sued by SEC For $26 Million Crypto Pyramid Scam
The U.S. Securities and Exchange Commission (SEC) filed a civil injunctive action against the operator of an alleged pyramid scheme, a fraudulent business model that raised $26 million from investors. The litigant for the situation is Daniel Pacheco, 45, a resident of San Clemente, California who has been accused by the SEC of selling unregistered securities as well as operating a multimillion-dollar digital currency pyramid scheme.
The complaint from SEC states the following :
“Pacheco engaged in a fraudulent pyramid scheme by soliciting IPro members through false and misleading means, including websites, promotional conferences, and in-person meetings, in which he touted the profit-making aspects of IPro’s iPN Compensation Plan, while at the same time diverting IPro funds for his own benefit.”
IPro’s Scam Tactics
The scam was mainly carried out with the help of E-Commerce Lessons and Redeemable Crypto points.
Pacheco sold unregistered securities through the California-based companies he controls (IPro Network LLC andIPro Solutions LLC) between the time frame of January 2017 to March 2018, the SEC expressed in the press release.
IPro came with its own cryptocurrency, Pro Currency. Pro Currency, the digital asset used to redeem IPro member points, is listed on CoinMarketCap as “ProCurrency” with the abbreviation of “PROC.”
The cryptocurrency listed on CoinMarketCap features the same logo as in this IPro tutorial video:
IPro members could gain crypto-redeemable points either as a rebate for package purchases or with the help of referring other users to IPro.
Pacheco raised over $26.5 million from U.S. investors via the close out of “IPro Packages” mainly focussed on e-commerce lessons on how to make profits with an online store as well as providing its customers with an enrollment-based pay plan and the ability to convert points into Pro Currency.
According to the SEC’s complaint, in approximately 14 months, Pacheco managed to grow IPro’s community rapidly to 20,000.
Pacheco told IPro investors that his company would create an e-commerce platform where Pro Currency would be utilized for transactions, which would provide a value for the cryptocurrency in the long term.
IPro also came up with an additional $50 annual activation fee for customers to become active members with potential advancements to becoming independent sales associates or premium independent sales associates.
Spiraling Ponzi Scheme
Pacheco didn’t shy out from taking full advantage of the funds he gathered with IPro packages. He soon went on to buy a luxury home for $2.5 million in Redlands, California along with a Rolls Royce for $150,000.
This was just the beginning for the mismanagement of IPro’s funds as it would go on and lead to a rapid collapse of the pyramid scheme as the company was unable to pay the commissions and other benefits like bonuses it owed to its members.
According to the SEC, the defendant transferred $1.9 million to Accept Success Corporation, a company owned by his daughter yet constrained by Pacheco, and $2 million to E Profit Systems LLC, a limited liability company that he also managed and used to hold $600,000 worth of IPro funds unjustly.
As 30% of the recruitment bonuses were paid in Pro Currency-convertible points, the company only had to allocate between 41.5 and 45.5 percent of all its income to pay out bonuses and commissions, according to the SEC. IPro had a compensation plan where the company was supposed to distribute recruitment bonuses between 58 and 65 percent of all its income from the firm’s packages.
But during January 2017 and August 2018, IPro could only pay out less than 30 percent to its members, which resulted in the organization crumbling and ceasing all operations in March 2018.
The end of ProCurrency
Cases like these are why the crypto industry has been under the fire ever since its creation. There is a vast inherent vulnerability in investing in cryptocurrencies primarily due to its volatile nature and scams like Pro Currency. This has been the No.1 hurdle in the mainstream adoption of cryptocurrencies.
Since January 2018, PROC has been in a continuous decline, falling from $0.10 down to as low as $0.0013. The current ProCurrency (PROC) Return on Investment (ROI) on CoinMarketCap is at -98.66 percent. By the looks of the currency’s decline, it will soon hit rock bottom.