A Denver District Court has found pastor Eli Regalado and his wife, Kaitlyn Regalado, liable for securities fraud in connection with a cryptocurrency scheme that raised nearly $3.4 million from investors. The court entered a judgment of $3.34 million against the couple and their company, INDXcoin LLC, for promoting and selling a worthless digital token primarily to members of their Christian community.
The ruling, issued on September 12 by Judge Heidi L. Kutcher, follows a civil case filed by Colorado's securities commissioner. Evidence presented showed the couple spent investor funds on personal luxury items, including a Range Rover, designer clothing, and extensive home renovations they claimed were directed by God.
Key Takeaways
- A Denver court found pastor Eli Regalado and his wife liable for a $3.34 million securities fraud judgment.
- The couple raised nearly $3.4 million from over 300 investors for their cryptocurrency, INDXcoin.
- Investor funds were spent on a home remodel, a Range Rover, luxury trips, and other personal expenses.
- Eli Regalado previously admitted to the spending in a video, stating "the Lord told us to do" the home remodel.
- The couple also faces a separate 40-count criminal indictment from a Denver grand jury.
Court Rules Against Pastor in Civil Fraud Case
The decision from the Denver District Court resolves the civil charges brought against Eli and Kaitlyn Regalado by Colorado Securities Commissioner Tung Chan in January 2024. The court found the couple and their associated companies liable for violating state securities laws through the sale of their INDXcoin cryptocurrency.
The judgment holds them responsible for repaying $3.34 million to the more than 300 individuals who invested in the scheme. The case was decided following a three-day bench trial where prosecutors laid out how the Regalados targeted their local religious community with promises of significant financial returns.
Legal Context: INDXcoin as a Security
A crucial element of the case was an earlier court decision in April, which legally defined INDXcoin as a security under Colorado state law. This classification was essential for the securities fraud charges to proceed, establishing that the Regalados were subject to regulations governing investments, which they failed to follow.
Commissioner Chan described the couple's actions as a modern take on an old deception. "The Regalados are 21st century false prophets who used the promise of new technology to carry out an old-fashioned fraud," Chan stated in a release. He emphasized that the ruling represents a significant victory for the protection of small investors in the state.
Details of the INDXcoin Scheme
Between June 2022 and April 2023, the Regalados actively promoted INDXcoin as a low-risk investment with the potential for high profits. They marketed the token through their platform, the Kingdom Wealth Exchange, building trust within Denver's Christian community.
According to the Colorado Division of Securities, the couple continued their marketing efforts even after an independent auditor gave the project a security rating of "0 out of 10." This report highlighted severe technical flaws and a lack of security, rendering the token essentially worthless.
Despite these warnings, investors were encouraged to put their money into the platform. The Kingdom Wealth Exchange, which was supposed to facilitate trading, collapsed within a day of its launch, leaving investors unable to access their funds and with no way to recover their initial investment.
By the Numbers: The INDXcoin Collapse
- $3.4 million: Approximate amount raised from investors.
- 300+: Number of individuals who invested in the scheme.
- $3.34 million: The civil judgment amount ordered by the court.
- 0/10: The security score given to INDXcoin by an independent auditor.
Pastor Admits to Spending Investor Funds
Following the initial fraud charges in January, Eli Regalado posted a video statement that gained international attention. In the video, he admitted to using the funds raised from investors for personal benefit but claimed it was based on divine instruction.
"Half of that money went to the IRS, and a few hundred thousand went to a home remodel that the Lord told us to do."
However, court evidence revealed a much broader pattern of personal spending. Financial records showed that investor funds were used for a variety of luxury purchases and lifestyle expenses. These included:
- A Range Rover vehicle
- Luxury handbags and designer clothing
- Jewelry
- High-end ski and yachting trips
- Cosmetic dental work
Regulators argued that the Regalados exploited the trust and faith of their community, leveraging their positions as religious leaders to convince people to invest without understanding the risks involved. The couple's lack of expertise in cryptocurrency development and financial management was a central point in the case against them.
Separate Criminal Charges Remain
While the civil judgment concludes the securities fraud case, the Regalados face further legal challenges. In July, a Denver grand jury handed down a criminal indictment against both Eli and Kaitlyn Regalado on 40 separate counts related to the cryptocurrency scam.
These criminal charges are distinct from the civil case and carry the potential for more severe penalties, including prison time. The indictment alleges a multi-million-dollar fraud, reflecting the serious nature of the accusations. The criminal proceedings are ongoing and will address the alleged intent to defraud investors.
The case serves as a cautionary tale for investors, highlighting the risks associated with unregulated cryptocurrency projects, especially those promoted by individuals without verified credentials or transparent operations. Financial regulators continue to advise the public to exercise extreme caution and conduct thorough research before investing in digital assets.
