Business

Dan Taylor

SEC acts against yet another crypto Ponzi scheme in $26M fraud

The U.S. Securities and Exchange Commission (SEC) has begun proceedings against a resident of California on charges related to operating what is being described as a “crypto Ponzi scheme.”

The SEC announced it had filed for an injunction against an individual named Daniel Pacheco, on grounds that he had sold unregistered securities through two companies, IPro Solutions LLC and IPro Network LLC.

Investors were given points which could be redeemed for the company’s proprietary PRO cryptocurrency, with as much as $26 million thought to have been invested in the scheme. Investors were also invited to recruit new members to the network in exchange for additional points and commissions, a feature often regarded as one of the hallmarks of this type of fraud.

Director of the Los Angeles Regional Office of the SEC, Michele Wein Layne, described the scheme as 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,” Layne said.

Pacheco is alleged to have used the money taken from investors to buy himself a $2.5 million home, as well as a Rolls Royce. In reality, Pacheco was unable to pay investors the commissions and bonuses they were owed.

According to a press release issued by the SEC, the investment on offer was in fact a form of unregistered security sale, and therefore was required to be registered with the Commission ahead of sale.

The regulator stated, “Pacheco’s offer and sale of IPro instructional packages constituted an unregistered sale of securities because the IPro instructional packages involve (i) an investment in a pyramid scheme; and/or (ii) an investment in the PRO Currency digital assets, and therefore must be registered with the SEC unless an exemption applies.”

The action is the latest example this week of regulators tackling fraud through crypto Ponzi schemes. By duping investors into paying on the promise of undeliverable returns, the scam works for as long as there is sufficient new money to cover payouts.

With the fraud resurfacing at an alarming rate within the cryptocurrency sector, it looks like regulators will continue to have a challenge on their hands.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as SegWitCoin BTC coins. Altcoins, which value privacy, anonymity, and distance from government intervention, are referenced as dark coins.

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