By CCN: On Thursday, the U.S. Securities and Exchange Commission (SEC) filed a civil injunctive action against the operator of an alleged pyramid scheme that raised $26 million from investors.
The defendant in the case is Daniel Pacheco, 45, a resident of San Clemente, California who has been charged by the SEC with selling unregistered securities as well as operating a multimillion-dollar cryptocurrency pyramid scheme.
E-commerce lessons and redeemable crypto points
Between Jan. 2017 and Mar. 2018, Pacheco sold unregistered securities through the California-based companies he controls, IPro Solutions LLC and IPro Network LLC, the SEC stated in the press release.
Pacheco raised over $26.5 million from US investors through the sale of “IPro Packages” that consisted of e-commerce lessons on how to make profits with an online store as well as providing its customers with a recruitment-based compensation plan and the ability to convert points into IPro’s own ‘cryptocurrency’, Pro Currency.
IPro members could gain crypto-redeemable points either as a rebate for package purchases or by recruiting others to IPro.
The investment scheme allegedly has all the features and trappings of a multi-level pyramid sham. | Source: Shutterstock
Pacheco told IPro investors that his company would create an ecosystem where Pro Currency would be used for e-commerce transactions, which would provide a value for the cryptocurrency in the long term.
IPro customers could decide to pay an additional $50 annual activation fee, to become active members with potential advancements to becoming independent sales associates or premium independent sales associates.
According to the SEC’s complaint, in approximately 14 months, Pacheco managed to grow IPro’s member base rapidly to 20,000.
The tale of the Rolls Royce and the luxury house
Pacheco used the funds he made with IPro packages to buy a luxury home for $2.5 million in Redlands, California as well as a Rolls Royce for $150,000.
According to the SEC, the defendant transferred $1.9 million to Accept Success Corporation, a company owned by his daughter but controlled by Pacheco, and $2 million to E Profit Systems LLC, a limited liability company that he also managed and used to retain $600,000 of IPro funds unjustly.
The mismanagement of IPro’s funds contributed to the rapid collapse of the pyramid scheme as the company was unable to pay the commissions and bonuses it owned to its members.
The scheme inevitably collapsed when members weren’t paid their heightened and unstainable returns. | Source: Shutterstock
IPro’s compensation plan required the company to distribute recruitment bonuses between 58 and 65 percent of all its income from the firm’s packages.
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.
But during Jan. 2017 and Aug. 2018, IPro paid out less than 30 percent to its members, which resulted in the company collapsing and ceasing operations in Mar. 2018.
The complaint reads:
“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.”
Pro Currency, the pyramid scheme coin
A quick Google search on Pro Currency, the digital asset used to redeem IPro member points, shows that it is listed on CoinMarketCap as “ProCurrency” with the abbreviation of “PROC.”
The digital asset listed on CoinMarketCap has the same logo as in this IPro tutorial video:
The current ProCurrency ROI on CoinMarketCap is at -98.66 percent. Since January 2018, PROC has been in a continuous decline, falling from $0.10 down to as low as $0.0013.