Colorado-based pastor Eligio “Eli” Regalado and his wife, Kaitlyn, are facing legal action after allegedly defrauding investors of millions of dollars through the sale of an unregistered crypto token, called INDXcoin.

The token was marketed to devout Christians as a “God-backed” digital asset.

The couple reportedly raised around $3.2 million through sales of the token, which they issued through 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, a Colorado judge has frozen the assets of Victorious Grace Church.

According to legal filings, the Regalados claimed that INDXcoin was backed by a cryptocurrency index and had sufficient assets to secure its value.

However, the Colorado Securities Commission alleges that the token had little to no backing, aside from the couple’s claim that it was supported by God’s guarantee of success.

“Defendant Eli leveraged the potential investors’ faith,” the complaint said. “He stated that their investments’ success was guaranteed by God.”

INDXcoin Qualified as a Security

The Regalados initially argued that INDXcoin was a utility token rather than a security offering, thus claiming exemption from securities regulations.

However, experts refuted their claim and stated that the token qualified as a security.

Undeterred, the couple claimed that God deemed INDXcoin a utility token.

Investors who expressed concerns about the lack of returns were urged by Eli Regalado to hold onto their investments, citing divine guidance.

The Regalados also controlled the Kingdom Wealth Exchange, the platform through which INDXcoin could be exchanged for USD.

Colorado regulators allege that the couple routinely shut down the platform to prevent a bank run.

Last year, they decided to close the exchange, citing a lack of active “stakers.”

They then instructed INDXcoin holders to remain invested and avoid questioning the situation, claiming that God had instructed them to do so.

During the course of their fundraising, the Regalados allegedly misappropriated $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 admitted to the charges but stated that a significant portion of the funds went to the IRS and home remodel that God had instructed them to undertake.

The Regalados are scheduled to appear in court on January 29 for a hearing on the Colorado Securities Commissioner’s request for a preliminary injunction.

Last year, the SEC asked a judge to decide whether certain cryptocurrencies qualify as securities in its ongoing lawsuit against blockchain company Terraform Labs.

More recently, in the SEC and Coinbase case, a federal judge questioned whether allowing the commission to impose its regulations on Coinbase would give the agency sway over markets it doesn’t have authority to supervise.

“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.”

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