Denver Pastor and Wife Banned 20 Years for $3.4M INDXcoin Crypto Fraud

Popular names like the Lazarus Group often make headlines when it comes to crypto scams. But in a rather interesting twist, market participants were shocked to learn that digital asset fraud has crept into the sacred corridors of religion. A U.S. court has convicted a Denver pastor and his wife of running a fake cryptocurrency scheme following their indictment in July.

Pastor and Wife Ordered to Repay $3.39M After Fake Crypto Scam

A Denver District Court has banned local pastor Eli Regalado and his wife, Kaitlyn, from crypto transactions or any form of investment for 20 years. Judge Heidi L. Kutcher, who passed the ruling, found the clergy couple guilty of securities fraud. 

The pastor and his wife created and launched a fake cryptocurrency, INDXcoin, defrauding unsuspecting investors of $3.34 million. Following Kutcher’s ruling, the Regalados were ordered to repay $3.39 million .

The defendants’ lack of understanding of the harm they have caused to their investors, coupled with their admitted desire to continue and expand the INDXcoin scheme, leads the court to conclude that (a ban on selling) is appropriate.

Judge Heidi Kutcher

Nathanael Enos, a friend of Eli’s, was also found guilty of selling INDXcoin. He was effectively slammed with a 20-year ban and ordered to repay $19,600.

Liquidity Shortfall Sinks INDXcoin, Ends in $3.4M Fraud Verdict

Between June 2022 and April 2023, the religious minister and his wife raised about $3.4 million from over 300 people—many of whom were from the local Christian community. According to reports, the Regalados promised investors a low-risk, high-yield crypto avenue through their Kingdom Wealth Exchange platform.

INDXcoin was designed to have its price tied to the average value of the 100 biggest cryptocurrencies. In other words, the price of one INDXcoin is the value sum of the top 100 coins divided by 100.

When its trading platform launched, the indexed price was pegged at about $9 per coin. However, the exchange lacked sufficient liquidity to repurchase coins at $9 after selling them at an initial price of between $1 and $1.50.

An anonymous trader in Canada made a series of sales that drained the exchange’s liquidity, causing it to collapse within a day of launch. Even after receiving an audit rating of zero, the Colorado Division of Securities said the Regalados continued to advertise INDXcoin as a safe crypto venture.

Colorado Securities Commissioner Tung Chan initially filed the fraud charges in January last year. As announced on Tuesday, the verdict, passed on Friday, September 12, following a three-day trial , has resolved all issues surrounding the case.

Colorado Couple Branded “False Prophets”

In a video that gained international attention, Eli Regalado confessed that he and his wife had taken money from INDXcoin. However, he claimed that about half of it went to IRS tax settlements, and the rest was used for a home renovation directed by God.

Investigators later uncovered that the money was also spent on personal luxuries, including cars, jewelry, expensive trips, clothing, and even dental implants.

Colorado regulators criticized the Regalados for weaponizing religion and cryptocurrency to lure and exploit victims. Commissioner Chan even called the clergy couple “21st-century false prophets” who used the promise of new technology and crypto assets to carry out old scams. He also praised the ruling as a win for Colorado investors.

Kutcher’s ruling builds on an April decision that classified INDXcoin as a security under state law. In a separate July ruling, a Denver grand jury also indicted Eli and Kaitlyn Regalado. They now face 40 criminal charges connected to what prosecutors say was a multi-million-dollar crypto scam.