How to create local users using iControl and Powershell

Try this. It works for me in 11.5.0. Understanding the API a little bit comes from here.

region Check that SnapIn is installed

try {
    Add-PSSnapIn -Name iControlSnapIn -ErrorAction Stop;
} catch {
    Write-Host "  iControlSnapin is not installed." -ForegroundColor Red;
    Write-Host "    Download the snapin from https://devcentral.f5.com/d/microsoft-powershell-with-icontrol" -ForegroundColor Red;

     Exit the script
    return;
}

endregion

region Credentials

if ($f5Credentials -eq $null) {
    $f5Credentials  = $(Get-Credential -Message "Credentials for F5 server connection");
}
Write-Verbose "  Credentials: $($f5Credentials.Username)";

endregion

region Create the User

 Establish the connection to the BIG-IP server
$iConn                          = Initialize-F5.iControl -HostName "SERVER" -Username $f5Credentials.Username -Password $f5Credentials.GetNetworkCredential().Password;
if (!$iConn) { throw "Connection could not be established to $($connSrc.Server)."; return; }

 Get the iControl object
$iCtrl                          = Get-F5.iControl;

 Create the UserInfo3 object
$userInfo                       = New-Object iControl.ManagementUserManagementUserInfo3;
 User
$userInfo.User                  = New-Object iControl.ManagementUserManagementUserID;
$userInfo.User.name             = "USERNAME";
$userInfo.User.full_name        = "NAME";
 Password 
$userInfo.Password              = New-Object iControl.ManagementUserManagementPasswordInfo;
$userInfo.Password.is_encrypted = $false;
$userInfo.Password.password     = "PASSWORD";
 Permissions
$perms                          = New-Object iControl.ManagementUserManagementUserPermission;
$perms.partition                = "[All]";  Or name of single partition
$userInfo.Permissions           = $perms;
 Login Shell
$userInfo.login_shell           = "/bin/bash";  Bash: "/bin/bash" || TMSH only: "/bin/false";

 Execute the create function
$iCtrl.ManagementUserManagement.create_user_3($userinfo)

endregion