Legal action has been brought against Colorado-based pastor Eligio “Eli” Regalado and his spouse Kaitlyn for allegedly scamming investors out of millions of dollars by selling an unregistered cryptocurrency token known as INDXcoin.As a digital asset that is “God-backed,” the token was promoted to pious Christians.Through the token’s sales, the pair reportedly raised over $3.2 million for their internet church, Victorious Grace.The Regalados were accused of fraudulent actions and unlawful securities sales without proper registration by the Colorado Securities Commissioner, who launched a case against them.Consequently, Victorious Grace Church’s assets have been blocked by a Colorado judge.Legal documents show that the Regalados asserted that INDXcoin had enough assets to support its value and was supported by a cryptocurrency index.
Aside from the couple’s assertion that the token was backed by God’s promise of victory, the Colorado Securities Commission asserts that the token had little to no basis.
“Defendant Eli leveraged the potential investors’ faith,” the complaint said. “He stated that their investments’ success was guaranteed by God.”
At first, the Regalados claimed that INDXcoin was immune from securities laws since it was a utility token rather than a security offering.Experts, however, disagreed, claiming that the token met the requirements to be classified as a security.Unfazed, the couple asserted that INDXcoin was declared a utility token by God.Eli Regalado, claiming divine guidance, urged investors who voiced concerns about the lack of returns to hang onto their money.Additionally, the Regalados were in charge of the Kingdom Wealth Exchange, which served as a medium for exchanging INDXcoin for US dollars.
According to Colorado officials, the couple regularly terminated the platform in order to avert a bank run.They closed the exchange last year due to a lack of active “stakers.”They then declared that God had commanded them to tell INDXcoin holders to stay invested and refrain from raising doubts about the circumstances.The Regalados are accused of stealing $1.3 million for their own use, such as opulent purchases, cosmetic dentistry, trips, and house improvements, during their fundraising efforts.Eli Regalado acknowledged the accusations in a video that was uploaded on the INDXcoin community website, but he also claimed that a sizeable amount of the money went to the IRS and the home renovation that God had given them permission to perform.
On January 29, the Colorado Securities Commissioner has requested a preliminary injunction, and the Regalados are expected to appear in court for that hearing.In its ongoing legal battle with blockchain startup Terraform Labs, the SEC requested last year that a judge rule on whether or not specific cryptocurrencies are securities.A federal judge recently questioned whether the commission would have control over markets it doesn’t have jurisdiction over if it were allowed to apply its regulations on Coinbase in the SEC and Coinbase dispute.
“I want to understand how your standard does not sweep in the collectible market or commodities,” U.S. District Judge Katherine Polk Failla told SEC lawyers in the courtroom.
“It is a real fear that I have that your argument is just sweeping too broadly.”