A Colorado pastor and his wife are in hot water this week after allegedly making away with millions of dollars raised through a crypto token they marketed to devout Christians—and claimed was made because of God’s instruction.
The Denver-area couple, pastor Eligio “Eli” Regalado and his wife Kaitlyn, reportedly raised some $3.2 million through sales of INDXcoin, a crypto token that they issued through an online church, Victorious Grace.
Earlier this week, Colorado’s Securities Commissioner sued the couple, claiming they fraudulently deceived investors and illegally sold securities without proper registration. On Thursday, a Colorado judge froze the assets of Victorious Grace Church based on those allegations.
According to legal filings made by the state, the Regalados claimed that INDXcoin was pegged to an index of cryptocurrencies, and backed by enough assets to secure that peg. In reality, the Colorado Securities Commission alleges, the coin was backed by almost nothing—save God’s word.
“Defendant Eli leveraged the potential investors’ faith,” the complaint said. “He stated that their investments’ success was guaranteed by God.”
From the start, the Regalados insisted that INDXcoin was not a security offering, but instead a utility coin, and therefore exempt from securities regulations. According to legal filings, when several experts rebuffed that claim and told the Regalados that INDXcoin was in fact a security offering, the couple attempted to invoke a power higher than that of the Howey Test.
“[We] wasted a lot of time trying to work with the world’s experts,” Eli Regalado posted on a community forum for INDXcoin holders last May, according to the filing. “[They said] what Eli and Kaitlyn are doing is a security, but God says, ‘No, it’s a utility coin.’”
INDXcoin was only able to be exchanged for USD through Kingdom Wealth Exchange, a platform that the Regalados also controlled and, Colorado regulators say, routinely shut down to avoid a bank run. When some investors began growing wary of INDXcoin’s lack of returns and considered fully cashing out, Eli Regalado reportedly told them that God was telling him that everyone should HODL.
After $INDX coin goes live… everybody who purchases $1000 or more worth of $INDX coin on the exchange will receive one! https://twitter.com/indxcoin/status/1623033718855110670/photo/1
— INDXcoin (@indxcoin) February 7, 2023
“Defendant further told investors that God was telling him to tell investors to “[s]tay where you’re at. Stay in INDXcoins. Stay with where I’m telling you to go. I’m going to make a way,” the complaint reads.
The Regalados eventually shut down the Kingdom Wealth Exchange last year, after claiming there were not enough active “stakers” to keep it running. The couple then relayed to INDXcoin holders that God had told them that everyone should stay invested in the coin, and not ask questions.
In the course of raising over $3 million, the Regalados allegedly pocketed $1.3 million, which they spent on luxury handbags, cosmetic dentistry, snowmobile adventures, an au pair , home renovations, luxury vacations, and other items.
Decrypt reached out to the Regalados but did not immediately receive a response. In a video posted to the INDXcoin community site Friday evening, Eli Regalado addressed the situation publicly for the first time.
“The charges are that Kaitlyn and I pocketed $1.3 million, and I just wanted to come out and say that those charges are true,” Regalado said. “But out of that $1.3 [million], half a million dollars went to the IRS, and a few hundred thousand dollars went to a home remodel that the Lord told us to do.”
Regalado also clarified that when God approached him about creating INDXcoin, Regalado initially had concerns about the token’s liquidity—to which God replied, according to the pastor, “Trust me.”
The couple will next face a hearing on January 29 regarding the Colorado Securities Commissioner’s request for a preliminary injunction.
At the hearing, state officials will likely expand on arguments as to how the Regalados violated state securities laws. Whether prosecutors will be able to prove that God did not speak to the Regalados about utility coins is another matter.