Jai Sahu
Colorado-based pastor Eligio “Eli” Regalado and his wife, Kaitlyn, are currently facing legal repercussions following allegations of defrauding investors out of millions of dollars through the sale of an unregistered cryptocurrency token known as INDXcoin.
This particular token was marketed to devout Christians as a “God-backed” digital asset, successfully raising approximately $3.2 million in funds through sales facilitated by their online church, Victorious Grace.
The Colorado Securities Commissioner has taken legal action against the Regalados, accusing them of fraudulent activities and the unauthorized sale of securities without proper registration. Consequently, a judge in Colorado has frozen the assets associated with Victorious Grace Church.
The Regalados maintained that INDXcoin was supported by a cryptocurrency index and had sufficient assets to secure its value. However, the Colorado Securities Commission disputes these claims, arguing that the token lacked substantial backing beyond the couple’s assertion of divine support for its success.
INDXcoin Classified as a Security
Initially, the Regalados contended that INDXcoin should be categorized as a utility token rather than a security offering, thus seeking exemption from securities regulations.
However, experts contradicted their assertion, asserting that the token indeed met the criteria for a security.
Unfazed, the couple insisted that INDXcoin held utility token status according to divine designation.
Eli Regalado encouraged investors concerned about diminishing returns to maintain their investments, citing divine guidance.
The Regalados also managed the Kingdom Wealth Exchange, the platform facilitating INDXcoin’s conversion to USD.
Colorado regulators allege that the couple frequently suspended the platform’s operations to prevent a potential bank run.
In the past year, they opted to close the exchange, citing a lack of active “stakers.”
Subsequently, they advised INDXcoin holders to maintain their investments without questioning the circumstances, citing divine instruction.
During their fundraising activities, the Regalados purportedly diverted $1.3 million for personal expenses, including luxury items, cosmetic dentistry, vacations, and home renovations.
In a video posted on the INDXcoin community site, Eli Regalado acknowledged the allegations but claimed that a substantial portion of the funds went towards IRS payments and home renovations, which they believed were God’s instructions.
The Regalados are scheduled to appear in court on January 29 for a hearing regarding the Colorado Securities Commissioner’s preliminary injunction request.
In the previous year, the SEC sought a judge’s determination on whether specific cryptocurrencies should be classified as securities in its ongoing legal battle with blockchain firm Terraform Labs.
More recently, in the SEC and Coinbase case, a federal judge raised concerns about whether granting the commission authority to impose its regulations on Coinbase would extend its influence over markets it lacks jurisdiction over.
“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.”