The US Securities and Exchange Commission (SEC) on Thursday charged Daniel Pacheco, the operator of iPro Network website, which promotes affiliate business and a cryptocurrency called ‘ PRO Currency.’
The case is yet another part of a bigger regulatory and legal crackdown aimed at abuses and outright fraud in the growing cryptocurrency industry.
The SEC alleges that the founders of the company lured investors with promises of innovative financial products, by selling instructional packages that provided lessons on e-commerce.
The company raised more than $26 million to finance the development of its blockchain-based direct sales network, that was meant to pay a rebate on purchases made through the platform. The iPro Network compensation plan sees affiliates invest in PRO Currency while commissions are paid when they recruit others who do the same.
As explained in the order, the SEC determined that iPro Network amounted to selling securities without filing a registration or qualifying for a registration exemption.
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The SEC claims that the offering ran afoul of securities laws because the vehicle being offered could be considered securities, and thus the principles should have registered with the SEC as broker-dealers.
“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,” said Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.
To date, the US regulators have settled most cryptocurrency-related cases outside of the courts, as the regulatory status of the digital assets generally, remains somewhat murky. However, the SEC warned that securities law might apply to some virtual tokens depending on their specific characteristics. In those cases, securities registration, disclosure, and other requirements apply.
Most recently, the agency postponed its decision on whether to approve the listing of what would have been the world’s first Bitcoin exchange-traded fund (ETF).
The SEC has taken enforcement actions against a dozen companies, putting their offerings on hold after issuing warnings. Further, it has frozen the assets of several cryptocurrency firms, halted ICOs and suspended trading.
Putting cryptocurrency companies and their advisers on notice, however, failed to chill the booming market.