Denver District Court Ruling on Fraudulent Cryptocurrency Activities
A recent ruling from a Denver District Court has determined that a pastor and his spouse from the area engaged in fraudulent activities that deceived hundreds of investors through the sale of church-related cryptocurrency tokens. According to a statement released by the Colorado Division of Securities on Tuesday, Eli and Kaitlyn Regalado are required to repay approximately $3.39 million after the judgment was finalized on Friday.
Details of the Case
This decision follows a trial that took place in May, where attorneys for the state articulated that the Regalados had raised funds from over 500 investors in a crypto token known as INDXcoin, in addition to drawing in 87 investors for another token, Sumcoin. Attempts to reach representatives for the Regalados, as well as the church they run, did not yield any immediate responses.
The court’s judgment indicated that the Regalados claimed divine instruction for the creation and promotion of INDXcoin, asserting that they were guided by God in their efforts. Testimonies revealed the existence of a group called the “Prophetic Team”, who reportedly held frequent meetings, sometimes five times per week, to provide updates on the token’s associated exchange, known as Kingdom Wealth. Decisions were made based on what the Regalados believed to be spiritual revelations, a fact that was heavily incorporated into their promotional strategy for the token.
Misrepresentations and Financial Misconduct
Despite the religious overtones surrounding INDXcoin, the court uncovered troubling misrepresentations made by the Regalados. Confirming that INDXcoin fell under the definition of a security per the Colorado Securities Act, Judge Kutcher noted that the couple misrepresented the token’s safety and profitability. They falsely assured investors of its reliability compared to other cryptocurrencies, while the token itself was not listed on traditional exchanges, a significant red flag.
The judgment also highlighted that INDXcoin was essentially valueless, emphasizing that there was no market demand for it. The Regalados allegedly funneled investor money into a personal bank account, spending around $1.3 million on extravagant purchases such as luxury goods, vacations, vehicles, renovations, and even contributions to their church, Victorious Grace. The court pointed out that there were no restrictions placed on their spending habits regarding investor funds.
Criminal Charges and Future Proceedings
In a related development, the Regalados are facing 40 felony charges following a grand jury indictment for crimes including racketeering and securities fraud, stemming from separate criminal proceedings initiated in July. They have both posted bail set at $100,000 and are anticipated to enter pleas soon. Unlike the civil case which enforces restitution and imposes a 20-year ban from securities dealings, the criminal charges carry potential prison sentences if they are found guilty.
