Colorado Pastor and Wife Face Legal Action Over Alleged Crypto Fraud
A Colorado-based pastor, Eligio “Eli” Regalado, and his wife are being sued for defrauding investors of millions of dollars through the sale of an unregistered cryptocurrency token called INDXcoin. The token was marketed to devout Christians as a “God-backed” digital asset, and the couple raised approximately $3.2 million through sales of the token via their online church, Victorious Grace. The Colorado Securities Commissioner filed a lawsuit against the Regalados, accusing them of fraudulent activities and illegal sale of securities without proper registration. As a result, the assets of Victorious Grace Church have been frozen by a Colorado judge.
Dispute Over Security Classification
The Regalados initially claimed that INDXcoin was a utility token rather than a security offering, but experts argued that it qualified as a security. However, the couple insisted that God had deemed INDXcoin a utility token. Investors who expressed concerns about the lack of returns were encouraged by Eli Regalado to hold onto their investments, citing divine guidance. The Regalados also controlled the Kingdom Wealth Exchange, where INDXcoin could be exchanged for USD. Colorado regulators allege that they frequently shut down the platform to prevent a bank run.
Misappropriation of Funds and Court Proceedings
During their fundraising efforts, the Regalados allegedly misused $1.3 million for personal expenses such as luxury items and vacations. In a video posted on the INDXcoin community site, Eli Regalado admitted to the charges but claimed that a significant portion of the funds went to the IRS and home renovations instructed by God. The couple is scheduled to appear in court on January 29 for a hearing on the Colorado Securities Commissioner’s request for a preliminary injunction.
Hot Take: SEC’s Ongoing Scrutiny of Cryptocurrencies
The case involving the Regalados is another example of the SEC’s scrutiny of cryptocurrencies and their classification as securities. Last year, the SEC asked a judge to determine whether certain cryptocurrencies qualify as securities in an ongoing lawsuit against Terraform Labs. In a more recent case involving the SEC and Coinbase, a federal judge expressed concerns about the commission’s broad regulatory power. The outcome of these cases will have implications for the regulation of cryptocurrencies and their impact on various markets.
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