Daniel Pacheco’s hilarious answer to SEC’s iPro Network fraud lawsuit
Daniel Pacheco has filed a hilarious answer to the SEC’s lawsuit against him and his company iPro Network.
He’s also going after the regulator through equally amusing counterclaims.
Daniel Pacheco (right) launched iPro Network back in early 2017. The scheme was quick to exit-scam via public listing of its PROC shitcoin, after which PROC went nowhere and inevitably dumped.
Today PROC is “worth” $0.00074.
In a lawsuit filed in May, the SEC accused Daniel Pacheco of running a $26 million dollar securities fraud pyramid scheme.
Pacheco filed his response to the lawsuit on August 13th. And it reads much as you’d expect, mostly denials, until you get to affirmative defenses.
In his response, Pacheco asserts the SEC can’t sue him because;
- a statute of limitations applies;
- “the SEC did not suffer any actual damages”; and
- Pacheco “may have additional defenses current unknown to (him)”.
Pacheco doesn’t state what statute of limitations he’s referring to. Nor am I aware of any that apply to securities fraud and/or pyramid scheme regulatory lawsuits.
It kind of sounds like Pacheco is trying to “terms and conditions” the SEC, which is bonkers hilarious.
Equally bonkers hilarious is Pacheco putting forth that the SEC can’t sue him, because he didn’t specifically scam the regulator itself.
Cuz y’know, that’s how the law works. Steal from whoever you want… as long as you don’t steal from the SEC, they can’t come after you.
Bear in mind at this stage Pacheco is merely filing a required response to the SEC’s lawsuit. What he puts in his answer doesn’t have to make sense, but hilarious nonsense isn’t a good look.
As part of his answer, Pacheco is also countersuing the SEC.
According to Pacheco, in early 2017 iPro Network discovered “numerous accounting discrepancies” with its processing merchant Fintact.
Fintact Payment Solutions LLC and Fintact Solutions Group LLC, both run by Matthew Lopez, are also defendants in the SEC’s iPro Network lawsuit.
Pacheco claims review by a forensic accountant revealed discrepancies in Fintact’s records, as well as a 2% overcharge on processing fees.
After several weeks, and after much expense by iPro, the forensic accountant successfully corrected the discrepancies created by Fintact.
However, due to the damage that had been caused by Fintact’s negligence, iPro no longer desired to utilize Fintact’s services.
Therefore iPro decided to directly process all payments itself.
By the October 2017, iPro Network was processing its payments internally.
In November 2017 iPro Network
verbally terminated the relationship with Fintact and requested that it return the balance of all monies that was held in trust.
This amount is believed to be in excess of $5,000,000, which includes both iPro’s profits, and monies that were to be dispersed to iPro’s distributors as commissions.
Fintact refused the request, prompting iPro to file a Texas District lawsuit against them in January 2018.
Durign the course of their Texas lawsuit, iPro Network learned that Matthew Lopez had split iPro Network’s funds between himself and three other entities.
This prompted another California State lawsuit by iPro Network in November 2018.
According to Pacheco’s counter-claim against the SEC, their basis iPro Network is a pyramid scheme is because “iPro was unable to pay commissions owed to its distributors”.
Before we get into why that’s folly, here’s the heart of Pacheco’s counterclaims against the SEC.
On information and belief, and unbeknownst to Pacheco, ever since iPro first requested the Trusted Funds from Fintact … the SEC had been undertaking efforts to thwart iPro’s ability from ever recovering those monies.
Specifically, when iPro demanded a return of its Trusted Funds so it could payout commissions, the SEC instructed Fintact to not turn over the monies by falsely representing to Fintact that iPro was operating a fraudulent pyramid scheme.
On information and belief, the SEC threatened Fintact that if it did turn over the Trusted Funds, that Fintact would subject itself to potential liability for aiding and abetting iPro’s alleged pyramid scheme.
For this reason, Fintact refused to turn over the Trusted Funds, which hindered iPro’s ability to pay commissions.
The truth, however, is that the SEC had no proof that iPro was operating a fraudulent pyramid scheme, and therefore undertook efforts to make it appear as if iPro was operating such a scheme.
Pacheco asserts the SEC created a scenario wherein iPro Network couldn’t pay its affiliates, to fit their pyramid scheme narrative. Which Pacheco also asserts has no other basis.
So naturally Pacheco is seeking to have the SEC liability claims against him transferred to Fintact.
I don’t know to what extent Pacheco’s lawyers are familiar with securities law, but this is hilariously reachy.
While iPro Network not being able to pay out (i.e. having collapsed) is cited by the SEC, regardless of whether a Ponzi pyramid scheme can pay out or not, it’s still illegal.
That seems to be a point lost on Pacheco in launching his crusade against the SEC.
And what about the alleged securities fraud (the Ponzi side of the business)?
The SEC’s securities fraud allegations don’t just dissolve because $5 mill was effectively frozen by a payment processor.
iPro Network was a pyramid scheme because it marketed nothing to retail customers. All commissions paid out were tied to recruitment of new investors.
iPro Network committed securities fraud by operating a passive investment scheme it failed to register with the SEC.
Said passive investment scheme was a Ponzi scheme by way of newly invested funds being used to pay existing investors.
None of that is addressed in Pacheco’s answer – but as stated it’s early days yet.
I for one can’t wait to read the SEC’s response to Pacheco’s nonsense.
And given Pacheco seems headstrong about having done nothing wrong, hopefully there’s tons more popcorn to come!